Hi Tim, happy to assist!
After participant/IRA owner reaches age 59½, there is no more 10% penalty, however, the withdrawal from the 401k will be taxed at ordinary income tax rate.
Here is the info from the IRS website:
Marginal Rates: For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).
The other rates are:
35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
32% for incomes over $170,050 ($340,100 for married couples filing jointly);
24% for incomes over $89,075 ($178,150 for married couples filing jointly);
22% for incomes over $41,775 ($83,550 for married couples filing jointly);
12% for incomes over $10,275 ($20,550 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).
It does not matter how you will use this money, as you will not be penalized, based on the fact that you are over the age of 59 1/2.
I would suggest having the correct amount of federal tax withheld, based on the amount you are planning to withdraw.
