Beat softened butter and cream cheese together on medium speed for 2–3 minutes until light and fluffy.

Add 1/4 cup granulated sugar, then the egg yolk and vanilla; mix until smooth.

Whisk flour and salt in a separate bowl, then add to the mixer on low speed just until no dry flour remains.

Divide dough in half, wrap each piece in plastic wrap, and chill for at least 30 minutes.

Stir 1/4 cup sugar and cinnamon together for the filling; keep melted butter and optional nuts or raisins nearby.

Roll one dough half between parchment to a 10×12-inch rectangle about 1/8-inch thick.

Brush with half the melted butter, sprinkle half the cinnamon sugar, and scatter optional add-ins.

Starting from a long edge, roll tightly into a log; cut into 16 pieces and place upright on a parchment-lined sheet.

Repeat rolling, filling, and slicing with the second dough half to make 32 pieces total.

Whisk egg with water for egg wash; brush tops of rugelach and sprinkle coarse sugar if desired.

Bake at 375°F (190°C) for 15–18 minutes, rotating sheets halfway, until pastries are golden brown.

Cool 5 minutes on sheets, then transfer to a wire rack; serve warm or at room temperature.