According to the exceptions to the early withdrawal penalty, when can a distribution be made without penalty due to age?

The correct choice highlights that one of the exceptions to the early withdrawal penalty allows for penalty-free distributions from retirement accounts when an individual separates from service after reaching age 55. This specific provision means that if someone leaves their job for any reason after turning 55, they can take withdrawals from their retirement account without incurring the standard 10% early withdrawal penalty that applies to distributions taken before age 59½.

This rule is designed to provide financial flexibility for individuals facing retirement or career changes later in life. It acknowledges that individuals at this age may need access to their funds due to a significant life transition, such as leaving the workforce.

The other options do not meet the criteria set forth by the IRS for penalty exceptions. Reaching age 50 does not qualify for special withdrawal penalties, as the penalty exemption generally starts only after age 55 for those who have separated from service. Turning 60 also does not provide a special status under these rules; the critical age for penalty-free withdrawals primarily remains 59½ unless other specific conditions, like the one mentioned, are met. Lastly, retiring at any age is not sufficient alone to avoid penalties, as the age threshold for penalty-free withdrawals is usually set at 59½ unless specified exceptions apply,