[blepisto]

My job was eliminated in December of 2008. I have left my 401k with my previous employer.
My age at the time was 56. I want to start taking monthly withdrawals from my 401K. Birthday 06 October 1952. I believe that because I am over the age of 55 when I lost my job that I will NOT have to pay the 10% tax penalty on the money I withdraw, but will have to pay income tax. Is this correct?

[ebaines]

Yes, you are correct. You pay ordinary income tax on your withdrawals, but because you were "separated from service" at age 55 or later you do not have to pay the 10% early withdrawal penalty. When you receive your form 1099-R from the plan administrator next January, it should list distribution code 2 in box 7, which signals to the IRS that you are under age 59-1/2 but an exception applies so no penalty is due (if a penalty is due it would show code 1).