Which individual is most likely to incur an early distribution penalty on their retirement savings?

The individual most likely to incur an early distribution penalty on their retirement savings is the one aged 45 who is withdrawing funds to cover medical expenses. Generally, early distributions from retirement accounts, which typically apply to individuals under the age of 59½, incur a 10% penalty unless certain exceptions are met.

In this case, while medical expenses can be one of the exceptions that allow for penalty-free withdrawals if they exceed 7.5% of adjusted gross income, not all medical expenses automatically qualify. If the individual's medical expenses do not meet this threshold, they would incur the early withdrawal penalty.

The other individuals mentioned, such as the taxpayer aged 60 withdrawing for a home purchase, can access their retirement funds without penalty since they are above the age threshold. The taxpayer at age 50 taking funds for college tuition may also qualify for an exception to the early withdrawal penalty for educational expenses. The taxpayer aged 57 who separates from service can withdraw funds without penalty if they meet the criteria of certain plans, specifically the rule allowing distributions after separation at 55 or older.

This context emphasizes that the individual aged 45 is making a withdrawal that does not guarantee an exemption from penalties, making them the most likely to incur such a penalty.