I had heard that when you turn 55 you can make a one time draw on your 401K without any penalties. Is this correct??

Partially. If you are over 55, you can get the 10% penalty waived is your plan permits withdrawals. You will still be subject to paying income taxes on the additional income for the year.

If you have been separated from service from the company in or after the year you turn 55, then yes - you can take withdrawals without having to pay the 10% penalty.