To not pay a 10% penalty for early withdrawal from a 401k, you must be 59-1/2, or you separated from service from that employer in the year you turn 55 or older. That means that if you are 55, but you are withdrawing from a plan sponsored by an employer you quit when you were 45, you don't meet the rule and you do owe the penalty. You only meet the rule if you separated from the employed that sponsored that plan at age 55 or older.
The income is still taxable as regular income, of course.
