IRA

Create the Opportunity for a Comfortable Retirement with an IRA

Principal Financial Group

John B. Sullivan

A Simple Five-Step Action Plan

Creating a Comfortable Retirement

What about a

Comfortable Retirement?

Define Comfortable

How do you create a comfortable retirement?

Ask yourself. . .

• What do you want to do in

• How much will you need to save?

retirement?money

You are in control of creating an opportunity for a more comfortable retirement.

Only 2 in 5 Workers Have Attempted to Calculate How Much Money They Will Need in Retirement

Source: 2006 Retirement Confidence Survey, EBRI

42%48%

53%

1998 1999 2000

44%38%

43%

2001 2002 2003

42% 42% 42%

2004 2005 2006

Today’s Agenda

Key points

Discuss how saving for retirement can be less daunting

Show you the power of tax-advantaged growth in your savings

Introduce the IRA as a powerful savings tool

Highlight the differences between a traditional IRA and Roth IRA

Give you the opportunity to make an appointment to go over your

personalized retirement savings strategy

Why don’t people save enough for retirement?

“I don’t make enough ”money. • Start small• Contributions may help reduce your current federal income tax burden

“I’m too to worry about something so far away.”young• Power of compounded earnings

“I’m too . It’s too late now.”old • Catch-up your contributions

Why don’t people save enough for retirement?Why don’t people save enough for retirement?

“It’s too ”risky. • Spread out your investments

“I can longer than most people before I retire.”work• Be prepared to leave the workforce early

“I’m willing to give up anything now, just to have more later.”

• More options to save• You can now send your federal tax refund directly to your IRA

not

Why don’t people save enough for retirement?

“Saving is too ”confusing.

• Help make sense of your options

“ will happen and I’ll be ok.”Something• Never hurts to have a plan

“The government and/or my will take care of me.”

• Take the lead of your futureemployer

“Why save when I can ?”borrow• Costly and not always available

Individual Retirement Arrangement (IRA)

An Individual Retirement Arrangement (IRA)

can help get you on track toward your retirement goals.

What is an IRA?

A personal, tax-advantaged arrangement

Benefits of an IRA:

• Help you save on current and potentially future federal income taxes

• Variety of investment options

• Potential for powerful compound earnings

The Power of Tax-Advantaged Growth

years until retirement

John20 years until

retirement

Kelly30 years until

retirement

Marc40

• $5,000 annual contribution

• Hypothetical 8% annual rate of return

• No additional distributions are made on the account

• Assumes a 28% federal income tax bracket

Marc40 years until retirement

Kelly30 years until retirement

John20 years until retirement

At Retirement. . .

Investor IRA Balance Taxable Investment Balance

$164,743 $136,496

$407,819 $288,587

$932,603 $554,854

The average American home has more television sets than people.*

How Will You Get the Money To Invest?

Flat-panel TV sales rose to more than 17 million in 2006.**

2.55 people per household2.73 tvs per household

Consider

* “Average home has more TVs than people,” usatoday.com, 9/21/2006.** Tarr, Greg, “Flat-Panel TVs Begin to Dominate U.S. Market,” This Week in Consumer Electronics (twice.com), 3/26/2007.

Will that T.V. you buy today be worth the

potential of $400,000* in retirement later?

Assumes: $5,000 annual contribution to a full tax-deductible traditional and/or Roth IRA into the account for 30 yearsHypothetical 8% rate of returnNo distributions made on accountsAssumes a 28% federal income tax bracket and a 15% long-term capital gains rate

Creating a comfortable retirement with an IRA in five simple steps

Establish your goals.

Determine which IRA is right for you.

Understand your options.

Consider funding sources.

Open an account and review it regularly.

Step 1:

Step 2:

Step 3:

Step 4:

Step 5:

10+ years


• Define your retirement

• Set your timeline

Short-term investor Intermediate-term investor Long-term investor

5 years or less 5 - 10 years

Establish your Goals.Step 1:

Long-Term Savings Goals I want to be able to put money aside and let it grow so I have income for retirement.

Tax-Savings Goals I want to be able to deduct my contributions from my federal income taxes.

Investment Goals I want to be able to choose my own investment options.

Balanced Income Goals I want federally tax-free growth for tax-free distributions later.

Legacy Goals

I want to be able to distribute my remaining retirement savings to my spouse and our children after I’m gone.


Establish your Goals. An IRA can be used for a variety of goals.Step 1:


Traditional IRA• Get a tax break now and the opportunity for tax-deferred growth*

Roth IRA• Make post-tax contributions now, and get federal tax-free growth and distributions on qualified withdrawals**

Determine which IRA is right for you.Step 2:

* Not all investors eligible to receive federal tax deduction. Consult IRS Publication 590 or tax advisor to determine eligibility. Distributions prior to age 59½ may be subject to an IRS 10% penalty.

** Only qualified distributions are eligible for federal tax-free growth/distributions. Distributions that are not deemed qualified may be subject to income taxes and IRS penalty if removed prior to age 59½.

A traditional IRA is a simple solution with immediate tax advantages


With a traditional IRA, you get:

• Opportunity to lower your tax liability

• Tax-deferred growth - you don’t pay taxes on your earnings until you withdraw money

• A wide range of investment choices to meet your individual needs

• Flexibility to invest as much as you’d like, up to annual limits*Based on your income level and other limitations; consult your tax advisor and financial professional for specifics.


Make post-tax contributions now, and get the potential for

federal tax-free growth and distributions.

With a Roth IRA, you get:

• Potential for tax-free distributions - never pay federal income

taxes on your earnings, assuming you meet withdrawal guidelines

• No annual distribution requirements - you don’t have to withdraw

money until you’re ready for retirement

• Flexible contributions - you can contributing contributing after age

70½ as long as you have earned income

• A wide range of investment choices to meet your individual needs




Traditional IRA

My spouse and/or I have earned income

Under age 701/2

My tax bracket in retirement will be lower than my tax bracket now

Not currently covered by an employer-sponsored plan

Covered by an employer-sponsored plan and my household AGI

below $53,000 (single)* or $85,000 (married)*

*(2008 tax year)

Understand your options.Step 3:


Roth IRA

My spouse and/or I have earned income

Our annual gross income is lower than $101,000 (single)* or combined less than $159,000 (married)*

My tax bracket in retirement may be higher than my tax bracket now

Prefer the potential for federally tax-free growth on qualified distributions in the future

I may work past 701/2

*2008 tax year

Understand your options.Step 3:

How much can you contribute to a traditional or Roth IRA?


Thereafter, the limit will be indexed for inflation annually in $500 increments.

• 2008 - $5,000

Catch-up contributions for age 50 and older

is $1000 annually!

Consider funding sources.Step 4:

You can fund your IRA through: Lump sum contributions Monthly contributions Direct contribution of your federal tax refund

Possible sources for funding your IRA: Savings/Checking/Certificates of Deposit (CD) Rollover from employer-sponsored retirement plan (401(k), 403(b), 457, pension) Inheritance of an IRA or employer-sponsored retirement plan


Consider funding sources.Step 4:


When is the deadline for contributing to an IRA?

A: The tax-filing deadline (generally April 15), not the end of the calendar year.

Q:

A:

Open an account and review it annually.Step 5:


• Review your account and revisit your goals every year.• Have you experienced changes in any of the following?

If so, you may need to adjust your savings strategy.

I can help you stay on track to creating a comfortable retirement.

Job Income Marital status Expenses Health Retirement outlook

Open an account and review it annually.Step 5:

Saving for retirement should be a priority

and it doesn’t have to be difficult or daunting

Create a Comfortable Retirement with an IRA

An IRA is a great retirement savings tool

that offers tax-advantaged growth

Traditional IRA and Roth IRA

have a few different features and benefits that may suit you best

A good way to determine

the right retirement savings strategy for you is to make a one-on-one appointment

John B. Sullivan

919-755-8689

[email protected]

Disclosures

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.

Insurance issued by Principal Life Insurance Company. Principal Investors Funds, Inc A. B and C shares are distributed by Principal Funds Distributor, Inc. Other

share classes of Principal Investors Funds, Inc. are distributed by Princor Financial Services Corporation, member SIPC. Principal Funds Distributor, Principal

Shareholder Services, Principal Management Corporation, and Principal Investors Fund, Inc. are collectively referred to as Principal Funds. These companies are

members of the Principal Financial Group®, Des Moines, IA 50392.

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