Before the Secure Act of 2019, heirs could “stretch” inherited IRA withdrawals over their lifetime, which helped reduce yearly taxes.

But certain accounts inherited since 2020 are subject to the “10-year rule,” meaning IRAs must be empty by the 10th year following the original account owner’s death. The rule applies to heirs who are not a spouse, minor child, disabled, chronically ill or certain trusts.

Since then, there’s been confusion about whether the heirs subject to the 10-year rule needed to take yearly withdrawals, known as required minimum distributions, or RMDs.

“You have a multi-dimensional matrix of outcomes for different inherited IRAs,” Dickson said. It’s important to understand how these rules impact your distribution strategy, he added.

After years of waived penalties, the IRS in July confirmed certain heirs will need to begin yearly RMDs from inherited accounts starting in 2025. The rule applies if the original account owner had reached their RMD age before death.

If you miss yearly RMDs or don’t take enough, there is a 25% penalty on the amount you should have withdrawn. But it’s possible to reduce the penalty to 10% if the RMD is “timely corrected” within two years, according to the IRS.

If you’re subject to the 10-year rule for your inherited IRA, spreading withdrawals evenly over the 10 years reduces taxes for most heirs, according to research released by Vanguard in June.

However, you should also consider “strategic distributions,” according to certified financial planner Judson Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, North Carolina.

“It starts by understanding what your current marginal tax rate is” and how that could change over the 10-year window, he said.

For example, it could make sense to make withdrawals during lower-tax years, such as years of unemployment or early retirement before receiving Social Security payments. 

However, boosting adjusted gross income can trigger other consequences, such as eligibility for college financial aid, income-driven student loan payments or Medicare Part B and Part D premiums for retirees.

Between higher prices and high interest rates, some Americans have had a hard time keeping up.

As a result, many are using more of their available credit and now, nearly 2 in 5 credit cardholders — 37% — have maxed out or come close to maxing out a credit card since the Federal Reserve began raising rates in March 2022, according to a new report by Bankrate.

Most borrowers who are over extended blame rising prices and a higher cost of living, Bankrate found.

Other reasons cardholders blame for maxing out a credit card or coming close include a job or income loss, an emergency expense, medical costs and too much discretionary spending.

“With limited options to absorb those higher costs, many low-income Americans have had no choice but to take on debt to afford costlier essentials — at a time when credit card rates are near record highs,” Sarah Foster, an analyst at Bankrate, said in a statement.

As prices crept higher, so did credit card balances.

The average balance per consumer now stands at $6,329, up 4.8% year over year, according to the latest credit industry insights report from TransUnion.

At the same time, the average credit card charges more than 20% interest — near an all-time high — and half of cardholders carry debt from month to month, according to another report by Bankrate.  

Carrying a higher balance has a direct impact on your utilization rate, the ratio of debt to total credit, and is one of the factors that can influence your credit score. Higher credit score borrowers typically have both higher limits and lower utilization rates.

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Credit experts generally advise borrowers to keep revolving debt below 30% of their available credit to limit the effect that high balances can have.

As of August, the aggregate credit card utilization rate was more than 21%, according to Bankrate’s analysis of Equifax data.

Still, “if you have five credit cards [with utilization rates around] 20%, you have a lot of debt out there,” said Howard Dvorkin, a certified public accountant and the chairman of Debt.com. “People are living a life that they can’t afford right now, and they are putting the balance on credit cards.”

Gen X, the so-called “sandwich generation,” must contend with supporting the generations ahead of them and their children at a time when the costs of higher education and health care have never been higher, studies also show.

Credit card delinquency rates are already higher across the board, the Federal Reserve Bank of New York and TransUnion both reported.

“Consumers have been measured in taking on additional revolving debt despite the inflationary environment over the past few years, although there has been an uptick in delinquencies in recent months,” said Tom McGee, CEO of the International Council of Shopping Centers.

A debt is considered delinquent when a borrower misses a full billing cycle without making a payment, or what’s considered 30 days past due. That can damage your credit score and impact the interest rate you’ll pay for credit cards, car loans and mortgages — or whether you’ll get a loan at all.

Some of the best ways to improve your credit standing come down to paying your bills on time every month, and in full, if possible, Dvorkin said. “Understand that if you don’t, then whatever you buy, over time, will end up costing you double.”

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While many investors have flocked to exchange-traded funds, they haven’t gained much ground with 401(k) plan participants.

Exchange-traded funds, or ETFs, debuted in the early 1990s and have since captured about $10 trillion.

Mutual funds hold about $20 trillion, but ETFs have chipped away at their dominance: ETFs hold a 32% market share versus mutual fund assets, up from 14% a decade ago, according to Morningstar Direct data.

“ETFs are becoming the novel structure to be used in wealth-management-type accounts,” said David Blanchett, head of retirement research at PGIM, Prudential’s investment management arm.

However, that same zeal hasn’t been true for investors in workplace retirement plans, a huge pot of largely untapped potential for the ETF industry.

At the end of 2023, 401(k) plans held $7.4 trillion, according to the Investment Company Institute, or ICI, and had more than 70 million participants. Other 401(k)-type plans, such as those for workers in universities and local government, held an additional $3 trillion, ICI data shows.

But hardly any of those assets are in ETFs, experts said.

“There’s a lot of money [in workplace plans], and there’s going to be more,” said Philip Chao, a certified financial planner who consults with companies about their retirement plans.

“It’s the final frontier [for ETFs], in the sense of trying to capture the next big pool of money,” said Chao, the founder of Experiential Wealth, based in Cabin John, Maryland.

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About 65% of 401(k) assets were invested in mutual funds at the end of 2023, according to ICI data. The group doesn’t report a corresponding statistic for ETFs.

A separate report from the Plan Sponsor Council of America, a trade group representing employers, suggests ETFs hold just a tiny fraction of the remaining share of 401(k) assets.

The PSCA report examines the relative popularity of investment structures, such as mutual funds and ETFs, across about 20 types of investment classes, from stock funds to bond and real estate funds, in 2022. The report found that 401(k) plans used ETFs most readily for sector and commodity funds — but even then, they did so just 3% of the time.

Mutual funds, collective investment trust funds and separately managed accounts held the lion’s share of the 401(k) assets across all investment categories, PSCA data shows.

Such investment vehicles perform the same basic function: They’re legal structures that pool investor money together.

However, there are some differences.

For example, ETFs have certain perks for investors relative to mutual funds, such as tax benefits and the ability to do intraday trading, experts said.

However, those benefits are “irrelevant” in 401(k) plans, Blanchett said.

The tax code already gives 401(k) accounts a preferential tax treatment, making an ETF advantage relative to capital gains tax a moot point, he said.

Blanchett said 401(k) plans are also long-term accounts in which frequent trading is generally not encouraged. Just 11% of 401(k) investors made a trade or exchange in their account in 2023, according to Vanguard data.

Additionally, in workplace retirement plans, there’s a decision-making layer between funds and investors: the employer.

Company officials choose what investment funds to offer their 401(k) participants — meaning investors who want ETFs may not have them available.

There may also be technological roadblocks to change, experts said.

The traditional infrastructure that underpins workplace retirement plans wasn’t designed to handle intraday trading, meaning it wasn’t built for ETFs, Mariah Marquardt, capital markets strategy and operations manager at Betterment for Work, wrote in a 2023 analysis. Orders by investors for mutual funds are only priced once a day, when the market closes.

There are also entrenched payment and distribution arrangements in mutual funds that ETFs can’t accommodate, experts said.

Mutual funds have many different share classes. Depending on the class, the total mutual fund fee an investor pays may include charges for many different players in the 401(k) ecosystem: the investment manager, plan administrator, financial advisor and other third parties, for example.

That net mutual fund fee gets divvied up and distributed to those various parties, but investors largely don’t see those line items on their account statements, Chao said.

Conversely, ETFs have just one share class. They don’t have the ability the bundle together those distribution fees, meaning investors’ expenses appear as multiple line items, Chao said.

“A lot of people like to have just one item,” Chao said. “You feel like you’re not paying any more fees.”

“It’s almost like ignorance is bliss,” he said.