It's just a matter of weeks before the end of the year -- and an important -- very important -- retirement account tax deadline for "owners over age 72" and "inheritors of any age." Dec. 31 is the deadline for complying with required minimum distribution (RMD) rules.

Timing is everything. No extensions are available beyond Dec. 31. And penalties for failing to take RMDs from traditional IRAs on time are severe.

Yet delays are not uncommon. As of Nov. 11, Fidelity Investments had an estimated 1.5 million IRA customers still needing to fulfill their RMDs for 2022.

Roughly 1 in 3 of these individuals had not yet taken any 2022 withdrawals to satisfy their RMDs.

Another 27% withdrew some -- but not all -- of their RMDs for 2022.

Were these individuals waiting for an up market before taking their RMDS?

RMDs for a given year are based on the previous year's Dec. 31 value of the account. And, unfortunately, the RMD does not adjust downward if the IRA value declines during the RMD year.

And, indeed, values did decline in 2022.

Fidelity Investment's quarterly reports tell the story. A year ago, the average IRA balance was $135,700 (third quarter of 2021); now, it's $101,900 (third quarter of 2022) (tinyurl.com/mph9v9hf).

The RMD measuring date (Dec. 31, 2021) happened to be close to a market high. The average Fidelity IRA account balance was $135,600 on Dec. 31, 2021 (tinyurl.com/y728p7ks).

Think of an "average" 95-year-old with a Dec. 31, 2021, balance of $135,600 whose account is now down to $101,900. His 2022 RMD would be $15,236, or 11.2% of the Dec. 31 value. That's 15% of its current value.

Using the same figures, a 75-year-old's 2022 RMD would be $5,512, again irrespective of the current value. That's 4.1% of the measuring date value and 5.4% of the current value.

The divisor for a 95-year-old under Table III (Uniform Lifetime) is 8.9, whereas someone who is 75 has a divisor of 24.6 (tinyurl.com/yc6tx8dh).

I've broken it down below.

First, for the 95-year-old:

IRA value on Dec. 31, 2021: $135,600

Divisor: 8.9

RMD for 2022: $15,236

RMD as a percentage of the IRA's value on Dec. 31, 2021: 11.2%

IRA value on Sept. 30, 2022: $101,900

RMD as a percentage of the IRA's value on Sept. 30, 2022: 15%

Now for the 75-year-old:

IRA value on Dec. 31, 2021: $135,600

Divisor: 24.6

RMD for 2022: $5,512

RMD as a percentage of the IRA's value on Dec. 31, 2021: 4.1%

IRA value on Sept. 30, 2022: $101,900

RMD as a percentage of the IRA's value on Sept. 30, 2022: 5.4%

If you could predict down years, you would take your RMD in the beginning of the year. The opposite would hold true in an up year -- i.e., you'd prefer to wait.

You might be wondering if the RMD can exceed the value of the IRA if investments tank. Yes, hypothetically, that can happen if the IRA holds highly speculative investments that have fallen dramatically during the year.

If that unlikely, but possible, event were to occur, the RMD would "never exceed the entire account balance on the date of distribution," according to an IRS Q&A (Question 1 at 26 CFR Section 1.401(a)(9)-5 at tinyurl.com/45wfz7rd).

Before leaving this subject, if your IRA's value has declined this year and you'd like to turn that negative into a positive, consider making a qualified charitable distribution (QCD). Note that since a QCD involves donating IRA money to charity, a QCD won't help someone who depends on his RMD to pay living expenses.

As the IRS points out, QCDs "offer eligible older Americans a great way to easily give to charity before the end of the year" (tinyurl.com/nhaan5ys).

The QCD allows you to donate to charity with RMD money; by doing that, you avoid an income tax bill on the RMD. There are special rules that need to be followed to qualify for a QCD. Plus, if your RMD is greater than $100,000, only $100,000 is tax-free. By the way, anyone over 70 1/2 can do a QCD, even though there are no RMDs for owners of IRAs until age 72.

If you haven't taken 2022 RMD action yet, now is the time. Don't delay. And, next year, start earlier.

For more information on QCDs, see IRS Publication 590-B at tinyurl.com/yc6tx8dh. With all of this, consult with your tax adviser before taking any action.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

A Connecticut 401(k) participant wants to know if she should avoid rolling over her 401(k) to an individual retirement account (IRA) because 401(k)s are protected from claims of creditors. If she does a rollover to an IRA, will she lose creditor protection?

That's a question that is most relevant to individuals who are fearful of being sued. The answer may depend on the state you live in. For example, in my home state, Connecticut, creditor protection extends to both IRAs and 401(k)s. That is not the case in all states.

But even in other states, there may be IRA protection in the case of bankruptcy, as I'll explain with the help of tax expert attorney Edward A. Renn of Withers Bergman LLP (tinyurl.com/2s3u2ded). Renn advises ultra-high-net-worth individuals on tax, estate planning and other private client concerns. Withers is an international law firm with offices in Connecticut, New York, London, Geneva, Singapore and other places.

We'll talk about two federal laws first, then state laws.

-- ERISA. There is a federal statute (ERISA -- the Employee Retirement Income Security Act of 1974) that protects retirement plans such as 401(k)s against claims of creditors. The exceptions are spouses who have a right to claim 401(k) assets through the courts (for example, in the case of a divorce). Another exception is a claim by the federal government.

ERISA does not extend its protections to IRAs.

-- Bankruptcy. A federal bankruptcy statute (the Bankruptcy Abuse Prevention and Consumer Protection Act (BABCPA)) does protect IRAs from creditors, no matter what state an account holder may live in.

To benefit, you have to file bankruptcy.

Protection for rollover IRAs is unlimited in dollar amount. (Rollover IRAs are funded with rollovers or transfers from qualified plans, such as 401(k)s.) Protection for IRAs that you yourself funded (contributory IRAs) is capped at approximately $1.5 million. The cap is due to increase in 2025 for cost-of-living adjustments.

That's good reason to set up a new rollover IRA account for accepting 401(k) rollover assets, instead of using an existing an IRA that you funded yourself.

-- States. Certain states, such as Connecticut, address IRA creditor protection by statute.

The Connecticut statute protecting IRAs from creditors is Section 52-321(a) of the Connecticut General Statutes. Protection is not limited in dollar amount.

In Connecticut, protection extends to owners of IRAs whether the IRA is set up to receive the rollover from the 401(k) or the IRA is one that you set up with your own contributions.

The exceptions are qualified domestic relations orders (QDROs); recovery of costs of incarceration; and recovery of damages by a victim of crime (tinyurl.com/mrm2kawu).

In other states that offer protection, there may be a dollar limit. For example, in Maine, the dollar amount protected is limited to $15,000. In California, the dollar amount protected is subject to court review of the debtor's situation.

If you are concerned about potential creditor claims against your IRA, you do need to know the rules of your state. Make sure to seek legal counsel specialized in this area of the law. Your 401(k) will be protected in all states.

On another note, people seeking asset protection for other assets will likely come across international asset protection trusts.

"The asset protection trust industry was born from doctors who couldn't get enough malpractice insurance," according to attorney Blake Harris of Blake Harris Law (blakeharrislaw.com). The primary jurisdiction for such trusts is the Cook Islands, located in the South Pacific.

Asset protection trusts are for protection against lawsuits, explained Harris, not for evading taxes.

Finally, let me invite you to a free online webinar with the Greenwich (Conn.) Library Wednesday, Dec. 14, at 1:00 p.m. EST on "Giving to the Next Generation." To sign up, go to tinyurl.com/2auyf4ss.

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While we are still waiting for the IRS to issue final regulations for the SECURE (Setting Every Community Up for Retirement Enhancement) Act, there are indications that Congress may soon act on a "SECURE Act 2.0."

The earlier SECURE Act, signed into law in 2019, brought notable changes that included moving the age for taking required minimum distributions from 70 1/2 to 72 and instituting a 10-year rule (in most situations) for having to empty an inherited retirement account.

Paul Richman, the chief government and political affairs officer at the Insured Retirement Institute (IRI), believes SECURE 2.0 legislation will soon be adopted. IRI is a not-for-profit organization representing the insured retirement income industry, financial advisers and consumers.

"House and Senate committee leaders negotiating the final SECURE 2.0 bill have recently publicly expressed confidence and optimism that whatever outstanding issues remain will be worked out," said Richman.

SECURE Act 2.0 has bipartisan support. The version created by the House of Representatives, called the Securing a Strong Retirement Act of 2022 (tinyurl.com/55trhjcu), was approved by a 414-5 vote in March of this year.

The Senate has two versions of its own for retirement reform: the RISE and SHINE Act (officially known as the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act -- tinyurl.com/c8yk6zut), which was produced by the Senate's Health, Education, Labor and Pensions Committee, and the Enhancing American Retirement Now (EARN) Act (tinyurl.com/ysktetxm), which came from the Senate Finance Committee.

While each of the current three versions has variations, there are common provisions that are expected to appear in the finished product.

What can we expect?

-- Indexing IRA catch-up contributions: In my recent column on new contribution limits for 2023 for individual retirement accounts (IRAs) and 401(k)s (if you didn't see it, email me at readers@juliejason.com for a copy), you might have noticed that while the additional amount you can contribute to a 401(k) at age 50 and older (known as the catch-up contribution) increases $1,000 in 2023 to $7,500 due to a cost-of-living adjustment, the catch-up amount for an IRA, which is unindexed, remains unchanged at $1,000. There is a provision in the new legislation that would index the IRA catch-up contribution.

-- After-tax employer contributions: Also, there is a provision that would allow an employee with a defined contribution retirement plan (like a 401(k) or 403(b)) to treat matching contributions and other contributions from an employer as after-tax Roth contributions.

-- RMDs age increases: An increase in the age for having to take RMDs is in the works. The Senate's EARN Act has the age move from 72 to 75, effective after 2031. The House's version has a more gradual, 10-year increase to 75: moving to 73 in 2023, 74 in 2030 and 75 in 2033. As I've stated before, I'm in favor of raising the RMD age -- the older the better. Keep in mind that these ages have to do with mandated withdrawals; optional withdrawals can occur at any age (above 59 1/2 without penalty for IRAs).

-- Others: Among the other proposals are a national database to help people find lost retirement accounts, higher catch-up contribution limits for those in the age range of 60 to 64 (the ages depend on the proposal), permitting employers to make matching contributions to retirement accounts for employees who are not contributing to their retirement plans but are making qualified student loan payments, and auto enrollment requirements for newly created 401(k) and 403(b) plans.

You can read respective summaries of the three legislative proposals at tinyurl.com/5xc5ytme (House) and tinyurl.com/nhzrpfec and tinyurl.com/3fxz5e5r (Senate).

So it appears the retirement realm likely could be changing again. The 100-plus associations and companies that called on congressional leaders for action will be pleased (tinyurl.com/ycxuedjt and tinyurl.com/vzn9taah). As will the millions of Americans who benefit from saving though retirement plans.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION