Investors can generally reduce their tax losses in a portfolio by using exchange-traded funds over mutual funds, experts said.

“ETFs come with tax magic that’s unrivaled by mutual funds,” Bryan Armour, Morningstar’s director of passive strategies research for North America and editor of its ETFInvestor newsletter, wrote earlier this year.

But certain investments benefit more from that so-called “magic” than others.

Mutual funds are generally less tax-efficient than ETFs because of capital gains taxes generated inside the fund.

Taxpayers who sell investments for a capital gain (i.e., a profit) are likely familiar with the concept of paying tax on those earnings.

The same concept applies within a mutual fund: Mutual fund managers generate capital gains when they sell holdings within the fund. Managers distribute those capital gains to investors each year; they divide them equally among all shareholders, who pay taxes at their respective income tax rate.

However, ETF managers are generally able to avoid capital gains taxes due to their unique structure.

The upshot is that asset classes that generate large capital gains relative to their total return are “a primary use case for ETFs,” Armour told CNBC. (This discussion only applies to buying and selling within the fund. An investor who sells their ETF for a profit may still owe capital gains tax.)

ETF and mutual fund dividends are taxed similarly. ETF dividends are taxed according to how long the investor has owned the fund.

Actively managed stock funds are also generally better candidates for an ETF structure, Fitzgerald said.

Active managers tend to distribute more capital gains than those who passively track a stock index, because active managers buy and sell positions frequently to try to beat the market, he said.

However, there are instances in which passively managed funds can trade often, too, such as with so-called “strategic beta” funds, Armour said.

Bond ETFs also have a smaller advantage over mutual funds, Armour said. That’s because an ample amount of bond funds’ returns generally comes from income (i.e., bond payments), not capital gains, he said.

Fitzgerald says he favors holding bonds in mutual funds rather than ETFs.

However, his reasoning isn’t related to taxes.

During periods of high volatility in the stock market — when an unexpected event triggers a lot of fear selling and a stock-market dip, for example — Fitzgerald often sells bonds to buy stocks at a discount for clients.

However, during such periods, he’s noticed the price of a bond ETF tends to disconnect more (relative to a mutual fund) from the net asset value of its underlying holdings.

The bond ETF often sells at more of a discount relative to a similar bond mutual fund, he said. Selling the bond position for less money somewhat dilutes the benefit of the overall strategy, he said.

Social Security may not be able to pay full Social Security retirement benefits as soon as 2033, based on current projections from the program’s trustees.

If Congress doesn’t move to fix the situation by that date, the general expectation is that millions of retirees could see a 21% across-the-board benefit cut.

The effects of that lost income could be enough to prompt a retirement crisis, since it would double the elderly poverty rate and reduce median senior household income by nearly 14%, according to new research titled, “A Simple Plan to Address Social Security Insolvency.”

Yet those broad benefit cuts would not necessarily have to happen, as the worst effects of insolvency could be prevented by executive action, according to the report by Andrew Biggs, a senior fellow at the American Enterprise Institute, and Kristin Shapiro, counsel at BakerHostetler.

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Instead of across-the-board benefit cuts, benefits could be reallocated to avoid increases in poverty for low earners while having just a small effect on the middle class, according to Biggs.

“It means big cuts on very rich people, but it avoids what you might think of as a retirement crisis, where everything is thrown into upheaval,” Biggs said.

Social Security draws from multiple sources to pay benefits — ongoing revenue from payroll taxes and income taxes, as well as trust funds that are used to supplement the monthly checks beneficiaries receive.

Yet as more people collect Social Security retirement benefits, the trust fund used to pay those benefits is running low. The depletion date — currently 2033 — represents the point at which the fund will be exhausted.

At that point, it is expected that 79% of those benefits will be payable.

Social Security has more than one trust fund, including one that pays retired workers, their families and survivors, and a second that pays disability benefits.

Together, those trust funds have a projected depletion date of 2035, when 83% of benefits would be payable. While merging the funds could provide additional financial runway, doing so it not allowed under current law, according to Biggs’ and Shapiro’s research.

The sooner Congress acts, the better it will be for all beneficiaries involved, to give them more certainty, said Shai Akabas, executive director of the Bipartisan Policy Center’s Economic Policy Program. A recent survey from Nationwide Retirement Institute found 72% of adults worry Social Security will run out of funding in their lifetimes.

The roughly 21% across-the-board benefit cut is “untenable and unsustainable, both politically and financially from a household perspective,” Akabas said.

However, if lawmakers fail to come to an agreement by the depletion date, the president could move to protect beneficiaries from the worst effects of the ensuing cuts, according to Biggs and Shapiro.

Once the depletion date arrives — whether it remains 2033 or shifts to another year — the president at the time could move to cap monthly benefits at about $2,050, the research proposes.

That change would reduce payments to beneficiaries who receive more than that amount and make Social Security solvent without adding new debt or increasing taxes.

At the same time, about half of all retirees and survivors would still receive their full benefit payments. Notably, no retiree would be pushed into poverty, according to the research.

To be sure, if the fund depletion date were crossed, lawmakers would face an unprecedented situation.

What happens next would depend on the interpretation of Constitutional law. That could prompt litigation, the research notes, including from beneficiaries who may not receive the benefits they were promised.

After 2025, lower taxes enacted by former President Donald Trump will sunset without action from Congress. If the provision expires, the tax brackets will revert to 2017 levels, shifting to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.