You stated: "then retired. She took a 401K distribution and had federal taxes taken out."

It seems this is the timing and sequence of events:

Worked in NJ for TX company = taxable wages for NJ from Oct 1.

Took retirement distribution, if taken after moving = fully reportable to NJ: "Include only the taxable amounts you received while you were a resident of New Jersey."

Read this: https://kulzerdipadova.com/news/new-jersey-extends-retirement-income-exclusion/