Getting the Most from Social Security

Agenda

Know Your Benefit Understand Your Options Maximize Your Benefit Getting Started

Know Your Benefit

Sources for retirement income for average income earners to sustain 80% 100% of pre-retirement income

Employer-Sponsored Retirement Plan and Personal Savings Social Security

Source: Social Security Administration, Office of Policy. Office of Research, Evaluation Statistics, Fast Facts and Figures About Social Security, 2010.

Know Your Benefit

Know Your Benefit

Full Retirement Age

Social Security Full Retirement Age
Birth Year Full Retirement Age

1943-1954
1955

66
66 + 2 months

1956
1957

66 + 4 months
66 + 6 months

1958
1959 1960 and later

66 + 8 months
66 + 10 months 67

Source: 2011 Social Security Administration, ssa.gov/retire2/.

Know Your Benefit

Your Age and Your Benefit

PROS Receive benefits earlier AGE

Higher monthly check

No penalty for employment

Highest monthly paycheck

No penalty for employment

62
Smallest monthly check

Full Retirement Age

No interim benefits

70
Receive benefits later

CONS

Potential reduction penalty for employment

Understand Your Options

Electing your benefit early vs. late Working while collecting your benefit Examining your tax situation Considering your spouses benefit

Understand Your Options

Early vs. Late

Early vs. Late Benefit Election
130% 120% 110% 100% 90% 80% 70%
Assuming Full Retirement Age at 66. Source: Social Security Administration.

Retire at age 66 with full monthly benefit

67 62 63 64 65

68

69

70

Take Benefits Earlier Take Benefits Later

Understand Your Options

Working While Collecting

Age Under Full Retirement Age In the year Full Retirement Age is reached At Full Retirement Age or older**

2011 Earned Income* Limits $14,160

Considerations For every $2 over the limit, $1 is withheld from benefits For every $3 over the limit, $1 is withheld from benefits until the month in which full retirement age is reached None

$37,680

No limits on earnings

* Income from work, W-2, and self-employment income. ** At FRA your benefit amount is adjusted to accommodate for the earlier reduction.

Understand Your Options

Examining Your Tax Situation

Single Filing Provisional* Income Under $25,000 Benefits Subject to Tax 0%

Married Filing Jointly Provisional* Income Under $32,000 Benefits Subject to Tax 0%

$25,000 - $34,000
Over $34,000

Up to 50%
Up to 85%

$32,000 - $44,000
Over $44,000

Up to 50%
Up to 85%

* Provisional Income is Adjusted Gross Income including any tax-exempt interest plus 50% of Social Security benefits. Source: 2010 Social Security Administration, http://www.ssa.gov/pubs/10035.html. Note: State and local taxes may differ.

10

Understand Your Options

Consider Spousal Benefits

Option 1 Individual Benefit Lower-earning spouse collects his or her own individual benefit

Option 2 Spousal Benefit Lower-earning spouse may collect a higher spousal benefit (up to 50% of their spouses full benefit) if the spouse has filed

Option 3 Survivor Benefit A widowed spouse may collect survivor benefits (up to 100% of their deceased spouses benefit)

11

Understand Your Options

Consider Spousal Benefits

Sam and Ann, both age 62
Full Retirement Age: 66

Social Security Benefits Name Age 62 Age 66 Age 70

Ann
Sam Spousal Benefit

$675
$1,562 $724

$900
$2,071 $1,035

$1,180
$2,733 $1,035

12

Maximize Your Benefit

Social Security Strategy Definition
Individuals at FRA or later who have claimed benefits then suspend the benefits. When benefits are reinstated down the road, they will receive a higher benefit amount. A FRA individual may claim onehalf of their spousal benefit, delay taking their own benefit.1 Individuals are allowed to change their earlier claiming decision.

Benefit
Allows spouse to claim spousal benefit, while the higher wage earner can continue to accrue benefits. Can increase the overall lifetime benefits.
Earn delayed credits and then claim their higher personal benefit at a later age or may help spouse to receive greater survivor benefit. Provides flexibility to cease taking benefits if life situation changes.

Claim and Suspend

Claim Now, Claim More Later

Do-Over2
1 2

Benefit will be reduced if not at Full Retirement Age. Both individuals must have filed for Social Security benefits.

Effective December 2010, the Social Security Administration published new rules regarding the withdrawal but has not released a final ruling. Visit ssa.gov for the most current information.

13

Maximize Your Benefit

Getting Started

Calculate expected Social Security benefit Determine your plan to maximize your benefit Apply for retirement benefits

14

Maximize Your Benefit

Getting Started
Most recent Social Security statement Most recent tax return Most recent pay statement from employer
Bring

Latest statements from all retirement plans

Latest statement from mutual funds Life and disability insurance policies

Annuity contracts
Wills and trust document(s)
15

Questions?
<FP Name> <FP Firm Name> <FP Contact Information>

16

Disclaimers
Investors should carefully consider a funds investment objectives, risks, charges, and expenses prior to investing. A prospectus containing this and other information can be obtained by contacting a financial professional, visiting principalfunds.com, or by calling 800-222-5852. Read the prospectus carefully before investing. A mutual funds share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.
The content of this presentation is based upon reliable source material and is believed to be correct as of the time of creation; however it is subject to change at any time without warning. Investors should consider consulting with their tax professionals prior to making decisions due to their unique circumstances. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group . Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds.

WELL GIVE YOU AN EDGE

MM4787Q-01 | 04/2011 | t11040604e4

2010 Principal Financial Services, Inc.

17