In which scenario would a taxpayer not receive any penalties for early withdrawal from a retirement account?

A taxpayer would not face penalties for early withdrawal from a retirement account when using the funds for qualified higher education expenses, which is why this choice is correct. The Internal Revenue Service allows penalty-free withdrawals from certain retirement accounts, such as IRAs, if the funds are used for qualified education expenses. This provision acknowledges the importance of investing in education and aims to provide financial flexibility for individuals pursuing higher learning.

In contrast, other scenarios listed involve early withdrawal for purposes that do not qualify for penalty exemptions. For example, withdrawing funds for a vacation or retiring early before the designated age can lead to penalties, as these do not fall under approved exceptions. Similarly, while paying medical expenses can sometimes provide a penalty-free withdrawal option under certain conditions, not all medical expenses qualify, which limits its applicability as a general answer. Thus, the exception for education-related withdrawals makes it the most relevant option regarding penalty-free access to retirement funds.