I have a small 401K worth approx. 16,000 I am now completely disabled at the age of 55 and need nursing home care/assisted living care. Can I withdraw the full amount without penalty or if the penalty is incurred what level would it be levied at, still the 10%:confused:

No penalty would be owed on your distribution, for either of two reasons:

1. Disability - If you are totally and permanently disabled (you cannot engage in any substantial gainful activity because of a physical or mental condition, and a physician determines that the condition has lasted or can be expected to last at least a year or can lead to death).

2. You are 55 and separated from service from your employer.

You can claim an exemption from the 10% early withdrawal penalty for either of these reasons. Hence all you owe on the withdrawal is ordinary income tax. The plan administrator will automatically deduct 20% withholding for federal income taxes, but if your state or city has income tax you will have to pay them as well.