Kathryn Manginelli Act of 2021 or the Compassionate Retirement Act of 2021 This bill allows premature distributions, without penalty, from tax-exempt retirement plans that are made to an individual who is certified by a physician as terminally ill. It also modifies the definition of terminally ill individual to increase from 24 to 84 the number of months after certification that an individual's illness can reasonably be expected to result in death.