Ask the Advisors: Going green, retirement planning

Dear Advisors:

How can I save tax dollars by going green?

The latest trend in the business sector has less to do with profitability and more to do with accountability. It is all about taking steps to protect the environment. Fortunately, there are a number of ways that employers and employees can implement environmentally-friendly changes while saving taxes and money in the long run.

Alternative motor vehicle credits:

Business taxpayers may qualify for a special tax credit for acquiring a vehicle that meets specified requirements. This includes the use of hybrid vehicles. The amount of the hybrid-vehicle credit, which ranges according to the vehicle's fuel economy, might be as high as $3,400. Caveat: The credit for hybrid vehicles begins to phase out when the manufacturer has sold more than 60,000 vehicles.

Home office deductions:

Instead of having employees drive to work every day, you might allow them to work from home all or part of the time. This generally reduces your company's overhead expenses. An employee may qualify for home-office deductions if he or she can establish that the arrangement is required for the employer's convenience.

Energy tax deductions:

Under the energy-tax law passed back in 2005, the owner of a commercial building may claim a deduction for certain energy-saving improvements. This tax break, currently scheduled to expire after this year, is available for improvements that achieve a 50 percent energy reduction for a targeted type of building. The deduction is equal to $1.80 per building square foot, although you may qualify for a lesser deduction of $0.60 per square foot under certain circumstances.

Dear Advisors: When should I start planning for retirement?

Now! It is not something you can put off much longer – especially if you hope to call it quits before you are eligible to receive full Social Security benefits.

Q. How much do you need to save?

A. The short answer often provided by financial experts is that you need to set aside enough to produce between 70 percent and 80 percent, or even 85 percent, of your current income. In reality, the amount you must save depends on a variety of factors, including your objectives, projected living expenses, your expected retirement age, health status and the return/risk ratio of your portfolio.

Q. When do you intend to retire?

A. Early retirement may be a dream of yours. But you may have to raise your savings goals or lower your expectations – or both. Consider the tax consequences of retirement-plan distributions. Withdrawals made prior to age 59 1/2 are generally subject to a 10 percent penalty tax in addition to regular income tax.

Q. How does early retirement affect Social Security benefits?

A. The earliest point at which you can apply for Social Security retirement benefits is age 62. At that point, your benefits will permanently be reduced to about 75 percent of the amount that would have been available at full retirement age. For instance, if you were born from 1943 through 1954, full retirement age is 66. The age increases gradually for younger individuals. For those born in 1960 or after, full retirement age is age 67.

Q. How should you receive retirement plan payouts?

1. You can elect to be paid in the form of an annuity (e.g., monthly payments for life). There are numerous variations. For example, a joint-and-survivor annuity allows your spouse to receive a portion of your benefit after you die, but it may reduce your own monthly payment. In contrast, a single-life annuity may provide a larger monthly payout, but no benefits for a surviving spouse.

2. You may take a lump-sum distribution of the full amount in your account. The primary advantage is that you can decide how your money is invested and you have complete access to the funds. However, you must pay a tax on the payout in the year of the distribution, unless you roll it over directly into an IRA (or other qualified plan).

The articles and opinions expressed in this newsletter were gathered from a variety of sources, but are reviewed by Erickson Braund prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices.

Erickson Braund, CRPC®, is a financial advisor for Rehmann Financial and is located in the Traverse City office. Securities offered through Triad Advisors, Member FINRA/SIPC. Contact Eric at 231.946.3230 or by e-mailing

Margaret Tipsword, CLU, ChFC, CASL, is the Director of Client Services for The Rehmann Group located in the Traverse City office. Contact Margaret at 231.946.3230 or by e-mailing