When writing about taxation of retirement accounts, I've referred to IRS Publication 590-B many times, as it provides guidelines to taxpayers for handling required minimum distributions (RMDs) from inherited accounts and IRA withdrawals in general. I also recommend that you talk with your tax adviser.

Before I proceed, a little history: The IRS used to have one publication that addressed issues related to retirement accounts: Publication 590, Individual Retirement Arrangements (IRAs). It covered both parts of IRAs: contributions and distributions.

However, starting with the 2014 tax-year returns (tinyurl.com/mw2pu7wn), the IRS split the publication into two sections: 590-A (which covered contributions to IRAs, along with the rules for rollover and conversion contributions) and 590-B (which dealt with distributions from IRAs, along with the rules for RMDs and IRA beneficiaries).

IRS Pub. 590-B is a key resource for taxpayers. Citing the most recent version (2024 tax year):

"This publication discusses traditional and Roth IRAs. It explains the rules for:

"Handling an inherited IRA, and ... [r]eceiving distributions (making withdrawals) from an IRA. ...

"It also explains the penalties and additional taxes that apply when the rules aren't followed. To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables" (tinyurl.com/y2cjrd5y).

As a taxpayer, however, you do need to be cautious about reading and relying solely on the publication. First, be mindful of the evolution of tax policy and the passage of time.

Let me give you an example. The SECURE Act, which was signed into law in December 2019, changed how RMDs were to be calculated for inherited traditional IRAs by establishing a new 10-year limit for distributions for most beneficiaries (as opposed to a potentially much longer period of life expectancy for the inheritor).

When the IRS first put out Publication 590-B in 2021 for the 2020 tax year, it offered an example that implied someone (a non-exempt beneficiary) who was subject to the new 10-year rule had to make an annual withdrawal from the inherited account.

After questions arose about whether that interpretation was correct, the IRS later released a corrected 590-B that indicated a beneficiary was allowed, but not required, to take distributions prior to the end of the 10th year, when the account needed to be emptied.

Then, in February 2022, the IRS and the Treasury Department issued proposed regulations for the SECURE Act, with subsequent final regulations not arriving until July 2024. Both the proposed and final regulations clarified that if RMDs were started by the deceased owner of the retirement account, they had to be continued by the beneficiary for nine years, then the rest of the account would be distributed in the 10th year.

In other words, Publication 590-B had it right, then changed the wording in the revised edition of 590-B, only to eventually go back to the original stance. In the meantime, the IRS issued three notices (2022-53; 2023-54, 2024-35) providing temporary relief from penalties for those who inherited IRAs after the initial owner died between 2020 and 2023 and did not make RMDs during that time.

In general, is Publication 590-B a reliable source that offers comprehensive guidelines for important tax issues? Yes. However, it's important to realize that it does not have the legal standing of the Internal Revenue Code (tinyurl.com/5cw5h7tx).

"The most reliable hierarchy of information begins with the Internal Revenue Code and Treasury Regulations, followed by official IRS rulings, notices, and announcements," Denise Appleby, CEO of Appleby Retirement Consulting Inc., wrote in the article "When IRS Guidance Goes Wrong: How to Avoid Costly IRA Mistakes" for Morningstar (tinyurl.com/yuy7rrww). "A Private Letter Ruling can also be useful, but it applies only to the taxpayer to whom it is issued."

My advice: When making decisions having to do with retirement accounts and taxes, understand that IRS Publications are helpful resources. But they are not the final word on how the Internal Revenue Code applies to a taxpayer's particular situation. When making a decision on an action that has tax consequences, your personal situation will dictate the result. That's why you need your tax adviser guiding you.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

When age is factored into studies of investment fraud and risk, seniors are often the focus. No longer. A younger cohort (ages 18 to 34) may actually be more likely to be susceptible to fraud than seniors.

As reported by the FINRA Investor Education Foundation study we discussed last week (tinyurl.com/4afmv6bw), 64% of those surveyed in this age group said they would opt for an investment that promised a guaranteed, risk-free 25% annual return -- a phrase that raises red flags with experts. What about seniors? Would they be attracted to such an investment? "No" or "don't know" for most of the 55 and older cohort, but "yes" for roughly 1 in 3.

What else can we learn about this younger cohort? The FINRA study reported:

-- This age group is much more likely than the other age groups surveyed (35 to 54; 55 and older) to own individual stocks than to own mutual funds (82% to 47%).

-- Only 26% are invested in non-retirement accounts.

-- In the past year, 38% have bought or sold investments in non-retirement accounts at least four times, and 80% use a mobile app for trading.

-- When it comes to options trading, 68% have an account that offers options trading, and 43% have traded options -- both figures much higher than those of the other two age groups.

-- As for cryptocurrency, 54% consider it to be very or extremely risky, but 1 in 2 are currently invested in it.

What about where the younger investor is getting financial investment information? The study reported more reliance on friends, family and colleagues (85%) than financial professionals (67%), and 1 out of 2 (54%) have talked with their parents about investing. When using social media channels for information on investing, YouTube (61%) is the most popular. Reddit (36%) and Instagram (35%) are next. Most (61%) use "finfluencers" (social media personalities) for recommendations when it comes to making investment decisions.

What about the overall investment knowledge of younger investors?

On an 11-question FINRA investment knowledge quiz, their age group answered only 4.3 out of 11 correctly. (Another 4.3 of 11 provided wrong answers, and 2.3 answered "don't know.")

That's not a good sign by any means. Notwithstanding, 1 in 2 (52%) consider themselves highly knowledgeable when it comes to investing.

A majority (62%) said that they need "to take big risks with ... investments in order to reach ... financial goals." A potential disconnect is when it comes to being willing to take "substantial financial risks" -- only 15% said they are actually willing to do so.

Some suggest there may be historical issues that influence younger investors: "Younger investors didn't grow up in the booming 1990s. Instead, their formative years were shaped by the 2008 financial crisis, the burden of student loans, and the turbulence of the pandemic. Trust in Wall Street has taken a hit -- and so has belief in the idea that you can build real wealth by just throwing money into the S&P 500 and waiting," citing the AOL article "Why Millennials and Gen Z Are Skipping Stocks and Investing in Startups" (tinyurl.com/3wy72vej).

Some may believe that "it is no longer possible to achieve above-average investment returns by investing solely in traditional stocks and bonds" -- a statement confirmed by 72% of high-net-worth younger investors (ages 21-43), compared to 28% of investors 44 and older, surveyed in the 2024 Bank of America Private Bank Study of Wealthy Americans (tinyurl.com/4edr6u5n).

How can younger investors best learn to make solid financial decisions for themselves and their future families? This will no doubt sound old-fashioned, but here it is: Stop depending on shortcuts and magical guaranteed investments. Start a step-by-step learning process that you can expect to continue for the rest of your life. Study history, especially bad market periods. Don't make the mistake of overconfidence earned during favorable markets. Don't use leverage (such as margin) without a full understanding of how it can work against you.

Remember that investing is a long game -- something that will need your attention for the rest of your life. It takes commitment, grit and persistence to succeed.

If you are a young investor, let me know what you think at readers@juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Some may assume that those who are targets of financial fraud are mostly elderly. However, a new FINRA Investor Education Foundation report suggests otherwise, which raises questions about vulnerability to fraud across all age groups.

"Investors in the United States: A Report of the National Financial Capability Study" was released on Dec. 4 (tinyurl.com/4afmv6bw). The foundation is a nonprofit educational organization established by FINRA, which oversees member broker-dealers who do business in the U.S.

In the NFCS Investor Survey, which involves 2,861 adults who have investments outside of retirement accounts, researchers asked the following question:

"If you heard about an investment opportunity that promises a guaranteed, risk-free 25% annual return every year for the next 5 years, would you invest in it?"

Surprisingly, half of the respondents indicated they would invest in the offer, apparently "unaware that the promise of a 'guaranteed, risk-free 25% annual return' should be a red flag indicating fraud," quoting the FINRA report. Only 21% said no. Another 30% chose "don't know," with the report suggesting that they "may be at least somewhat cautious."

The big eye-opener comes when you look at ages. Older investors did not fall for the extraordinary promise of riches. Young people did.

"Only" 36% of those 55 or older said they would opt for the investment (with 42% choosing "don't know"), as opposed to 60% in the 35 to 54 age bracket (20% "don't know") and 64% of those 18 to 34 (16% "don't know").

Experience also played a role, as one might expect. The more experienced investors were less likely to embrace the opportunity. Forty percent of those with 10-plus years of investing experience said they would invest, compared with 61% who had two to 10 years of investing experience, and 63% of those with fewer than two years.

"All investments involve some level of risk, and investors must understand their own risk tolerance to make informed decisions," Gerri Walsh, president of the FINRA Foundation, said in a release about the findings (tinyurl.com/yz7964bp). "At the same time, investors must learn to spot the red flags of investment fraud -- including the promise of little to no risk with unusually high returns."

Would you invest in such an asset, or would you immediately turn it down? If it piqued your interest, would you do research on it before jumping in?

Keep in mind that sometimes "you don't know what you don't know."

For example, in another category of the FINRA survey, investor knowledge was tested through 11 multiple-choice questions on various investment-related topics and concepts.

Those respondents who considered themselves to have a high overall knowledge of investing (56%) got the most questions right (an average of 6.0). But the report also pointed out that a majority of those respondents (51%) "are unable to identify the warning signs of fraud, suggesting that overconfidence can put investors at risk."

While respondents in general did well on topics related to inflation (77% correct), risk and return (74%) and the definition of stocks (74%), they had much more difficulty with topics such as the definitions of selling short (23%) and buying on margin (20%).

When Olivia Valdes, principal research analyst at the FINRA Investor Education Foundation, was asked in a virtual press conference related to the study, "Are investors overconfident on investment knowledge?" she answered "Yes," pointing out that this was particularly true for younger and less experienced investors, as well as margin and options traders.

A key to financial knowledge is to choose reliable sources. One resource I have mentioned before is the FINRA Securities Helpline for Seniors (tinyurl.com/3dc87a3s), which takes calls from people of all ages. One goal of the helpline is to help prevent potential losses from fraud.

FINRA also has BrokerCheck (brokercheck.finra.org), where you can research the background and experience of financial advisers and firms.

Websites like those for the FBI (tinyurl.com/55yzyswe) and the U.S. Department of Justice (tinyurl.com/4f3z58yw) have sections devoted to elder fraud. The U.S. Securities and Exchange Commission has a webpage where you can submit a tip or complaint about possible securities fraud (tinyurl.com/2rxe6vmv).

On the educational front, FINRA (tinyurl.com/ys3d7b95) and Investor.gov (tinyurl.com/55atdvzf) both have pages devoted to combating investment fraud.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION