Are you planning to retire early? If so, you may want to withdraw funds stashed in your 401(k) or another retirement plan at work. But there could be a steep tax price to pay. If you're under age 59½, you'll likely owe a 10% penalty along with regular income tax on the amount of the withdrawal. But there are ways you might be able to sidestep that extra tax. One of the most popular methods is to take your money in "substantially equal periodic payments" (SEPPs).

With this approach, you arrange to receive a series of payments that must continue for at least five years or until you reach age 59½, whichever is longer. For example, if you're 50 now, the payments would have to extend at least 9½ years. The payment amounts are based on your life expectancy or the joint life expectancies of you and a designated beneficiary or beneficiaries. And this will work only if you've "separated from service." You can't still be working for the employer sponsoring the plan.

The IRS has specified three payment methods you could follow:

1. With the required minimum distribution (RMD) method, you divide the account balance by your life expectancy according to an IRS table. You'll arrive at a slightly different payment amount for each year because both your life expectancy and your account balance will change over time.

2. The fixed amortization method, in contrast, gives you the same payment each year. It's determined using a life expectancy table and an assumed interest rate over a period of years. The IRS lets you choose from two different life expectancy tables and several interest rate assumptions.

3. Finally, the fixed annuitization method arrives at an annual payment by dividing the account balance by an annuity factor derived from a mortality table with an assumed interest rate. This method, too, yields an amount that stays the same throughout the distribution period.

The RMD method is the easiest of the three methods to use, but it generally will result in the smallest payout. But whichever one you opt for, the IRS will let you switch once to another method. You might want to do that, for example, if the stock market has had a bad year and your 401(k) has suffered big losses. In that case, you could decide to switch from fixed amortization or fixed annuitization to RMD so that your withdrawals wouldn't deplete the account so quickly.

Keep in mind, too, that this isn't a complete tax break. You'll still owe regular income tax on the SEPPs.