Some points to consider.
1. You don't have to withdraw all at once, you can withdraw as needed.
2. You will pay regular income tax plus a 10% penalty. Any withholding is only an estimate, and you may owe additional tax when you file your tax return.
3. You have the option of rolling the funds over into a private IRA and then taking withdrawals from the IRA. There are some legal differences between leaving the money in the 401k and moving it to an IRA, but without knowing your exact situation, it's hard to discuss further.
4. If you are "permanently and totally disabled" for IRS purposes, you still have to pay income tax but you don't have to pay the penalty. For the IRS, disabled means unable to perform substantial gainful work (work for money) due to a condition that is permanent or will last at least one year. Note that some people who meet a medical definition of disabled (blind, for example) are usually not disabled for tax purposes because they can still work for money, with accommodations. If you indicate on your tax return that you are disabled, you don't send proof, but keep proof (such as a doctor's letter) with your tax papers for at least 3 years in case of audit.
