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I am medically retiring at 54. Can I take a partial withdrawal and avoid additional penalties ? If so what are the limits ? How do I approach this ?
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The definition of "disabled" for the purpose of the penalty exception, from the instructions for Form 5329:
Distributions due to total and permanent disability. You are considered disabled if you can furnish proof that you can’t do any substantial gainful activity because of your physical or mental condition. A medical determination that your condition can be expected to result in death or to be of long, continued, and indefinite duration must be made.
If you meet this definition of being disabled and the Form 1099-R does not have code 3, you'll need to use the code 03 exception on Form 5329 to claim this penalty exception. Based on this and the documentation that you supply to the IRS, usually a doctor's statement, the IRS generally makes its own determination as to whether the distribution meets the standards for the disability exception to apply.
