My wife has gone on workers comp. I want to close my retirement account (5K) and we are being told I can't. I have to be 59 & 1/2 or quit to do that. Is this correct?

Yes - correct. As an active emplyee you may be able to take a loan, but not a withdrawal, UNLESS you meet one of the "hardship" definitions, which are:

1. Un-reimbursed medical expenses for you, your spouse, or dependents.
2. Purchase of an employee's principal residence.
3. Payment of college tuition and related educational fees and expense such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
4. Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
5. Funeral expenses
6. Repair of a primary residence.

Note that even though a withdrawal may be defined as “hardship,” that does not necessarily mean that it is exempt from the 10% early withdrawal penalty. Hence if your plan allows you to take a withdrawal, you must be prepared to pay income tax (federal and state/local, if applicable), as well as a 10% penalty.

And you may take a loan out against it normally