Hi, Laney! I presume your question relates to taking early distributions from a retirement account and one of the exceptions related to age 55 separation.
Generally speaking, early withdrawals from retirement plans are not only subject to income tax, but can also be subject to a 10% penalty for taking the distribution before age 59 1/2. However, there are several exceptions to the 10% penalty.
One of the exceptions from the 10% penalty is for a distribution from a qualified plan (such as a 401k) received after separation from service when the separation from service occurs in or after the year you reach age 55, or 25 years of service under the plan, whichever is earlier. Note this exception ONLY applies to distributions from a qualified plan, and so an early distribution from an IRA, SEP IRA, or SIMPLE IRA would not qualify for this particular exception. The exception does NOT say it only applies to distributions in the year of separation - it would apply to ANY early distribution you take from age 55 to age 59 1/2,provided you were at least age 55 in the year that you separated from service. Note the age 55 requirement drops to age 50 for qualified public safety employees and private sector firefighters.
So, if you were separated from service when you were age 55 or older, any distributions you take from a qualified plan at that point of time until you reach age 59 1/2 would not be subject to the 10% early withdrawal penalty.
You will need to include Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts with your tax return for the year(s) you take the early distributions. On that form, you would indicate Exception Number 1 on line two where it says "Enter the appropriate exception number from the instructions" and then list the amount of the distributions that meet this exception on line two of the form.
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