This answer is from Long terd Disablity and withdrawl from 401K
Liz,
If you were totally disabled and took out the withdrawal from your 401(k) after that point, you should be able to claim an exception to the early withdrawal penalty on account of the disability. Of course, this doesn't avoid owing income taxes, but it will help you to avoid the additional 10% early withdrawal penalty.
Bear in mind that to quality for this exception, you must be totally disabled and unable to do any "substantial gainful activity" because of your condition. You should maintain any documentation that you have of the timing and nature of the disability, and a physician must be willing to affirm that your condition will last indefinitely.
I hope that helps a little! Best wishes to you in this difficult time!


