Getting the Most from Social Security

The Brantley GroupThe Brantley GroupSimple. Relevant. Impactful.Simple. Relevant. Impactful.

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Agenda

Know Your Benefit

Understand Your Options

Maximize Your Benefit

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Know Your Benefit

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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

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Social Security Full Retirement Age

Birth Year Full Retirement Age

1943-1954 66

1955 66 + 2 months

1956 66 + 4 months

1957 66 + 6 months

1958 66 + 8 months

1959 66 + 10 months

1960 and later 67

Source: 2010 Social Security Administration, ssa.gov/retire4/retirechart.htm.

Know Your Benefit

Full Retirement Age

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Receivebenefitsearlier

Higher monthlycheck

No penalty for employment

Highest monthlypaycheck

No penalty for employment

Smallest monthlycheck

Potential reductionpenalty for employment

No interimbenefits

Receivebenefits later

62 70AGE

PROS

CONS

Full Retirement Age

Know Your Benefit

Your Age and Your Benefit

Electing your benefit — early vs. late

Working while collecting your benefit

Examining your tax situation

Considering your spouse’s benefit

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Understand Your Options

Understand Your Options

Early vs. Late

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130%

120%

110%

90%

80%

70%

Early vs. Late Benefit Election

Assuming Full Retirement Age at 66. Source: Social Security Administration.

100%62 63 64 65

67 68 69 70

Take Benefits EarlierTake Benefits Later

Retire at age 66 withfull monthly benefit

Working While Collecting

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Understand Your Options

Age 2011 Income* Limits Considerations

Under Full Retirement Age

$14,160 For every $2 over the limit, $1 is withheld from benefits

In the year Full Retirement Age

is reached$37,680

For every $3 over the limit, $1 is withheld from benefits until

the month in which full retirement age is reached

At Full Retirement Age

or older**

No limits on earnings

None

* Adjusted Gross Income (AGI).** At FRA your benefit amount is adjusted to accommodate for the earlier reduction.

Examining Your Tax Situation

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Understand Your Options

Single Filing

Provisional* Income

Taxed Benefits

Under $25,000 0%

$25,000 - $34,000 Up to 50%

Over $34,000 Up to 85%

Note: State and local taxes may differ.

Married Filing Jointly

Provisional* Income

Taxed Benefits

Under $32,000 0%

$32,000 - $44,000 Up to 50%

Over $44,000 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.

Consider Spouse’s Benefit

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Understand Your Options

Option 1Individual Benefit

Option 2Spousal Benefit

Option 3Survivor Benefit

Lower-earning spouse collects his or

her own individual benefit

Lower-earning spouse may collect a higher

spousal benefit (up to 50% of their spouse’s

full benefit) if the spouse has filed

A widowed spouse may collect survivor

benefits (up to 100% of their deceased spouse’s benefit)

Consider Spouse’s Benefit

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Understand Your Options

Social Security Benefits

Name Age 62 Age 66 Age 70

Ann $675 $900 $1,180

Sam $1,562 $2,071 $2,733

Spousal Benefit $724 $1,035 $1,035

Sam and Ann, both age 62

Full Retirement Age: 66

Maximize Your Benefit

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Social Security Strategy

Definition Benefit

Claim and Suspend

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.

Allows spouse to claim spousal benefit. Can increase the overall

lifetime benefits, specifically considering survivor planning.

Claim Now, Claim More Later

A Full Retirement Age individual may claim one-half of their

spouse’s benefit, delay taking their own benefit.1

Can earn delayed credits and then claim their higher personal benefit at a later age or may help spouse

to receive greater survivor benefit.

Do-OverIndividuals are allowed to change

their earlier claiming decision.2

Provides flexibility to cease taking benefits if life situation changes.

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

2 Effective December 8, 2010, Social Security Administration published new rules regarding the withdrawal policy and will make a final ruling in 2011.

Calculate expected Social Security benefit

Determine your plan to maximize your benefit

Apply for retirement benefits

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Getting StartedMaximize Your Benefit

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• Most recent Social Security statement

• Most recent tax return

• Most recent pay statement from employer

• Latest statements from all retirement plans

• Latest statement from mutual funds

• Life and disability insurance policies

• Annuity contracts

• Wills and trust document(s)

Bring

Getting StartedMaximize Your Benefit

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Retirement Income Planning

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Things to Consider

• Shortfall – gap between your retirement income needs

• Longevity – outliving your assets and running out of money

• Market Risk – relying on your portfolio to provide income, subject to market's ups and downs

• Inflation – ability to maintain purchasing power

Retirement Risks

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Things to Consider

When you are considering when to collect retirement benefits, one important factor to take into account is how long you might live.

According to data compiled by the Social Security Administration:

A man reaching age 65 today can expect to live, on average, until age 83. A woman turning age 65 today can expect to live, on average, until age 85.

And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

Life Expectancy

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Receivebenefitsearlier

Higher monthlycheck

No penalty for employment

Highest monthlypaycheck

No penalty for employment

Smallest monthlycheck

Potential reductionpenalty for employment

No interimbenefits

Receivebenefits later

62 70AGE

PROS

CONS

Full Retirement Age

Know Your Benefit

Your Age and Your Benefit

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Preparing Your Portfolio

Potential Solutions from Principal Funds

Shortfall Longevity Market Inflation

Diversified Real Asset Fund1 X X

Equity Income Fund2 X X X

Global Diversified Income Fund3,5 X X X

High Yield Fund4,5 X X

Income Fund4 X X

Preferred Securities Fund5 X X

Past Performance is no guarantee of future results.

Asset allocation/diversification does not guarantee a profit or protect against a loss.

Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise.

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DisclosuresPreparing Your Portfolio

1 Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise. Neither the principal of bond investment options nor their yields are guaranteed by the U.S. or any other government entity. Investments concentrated in natural resources industries can be affected significantly by events relating to those industries, such as variations in the commodities markets, weather, disease, embargoes, international, political, and economic developments, the success of exploration projects, tax and other government regulations, and other factors. Investing in derivatives entails specific risks relating to liquidity, leverage, and credit that may reduce returns and/or increase volatility. REIT securities are subject to risk factors associated with the real estate industry and tax factors of REIT registration. An MLP that invests in a particular industry (e.g., oil and gas) may be harmed by detrimental economic events within that industry. As partnerships, MLPs may be subject to less regulation (and less protection for investors) under state laws than corporations. In addition, MLPs may be subject to state taxation in certain jurisdictions, which may reduce the amount of income paid by an MLP to its investors.

2 REIT securities are subject to risk factors associated with the real estate industry and tax factors of REIT registration.

3 International investing involves increased risks due to currency fluctuations, political or social instability, and differences in accounting standards. These risks are magnified in emerging markets. REIT securities are subject to risk factors associated with the real estate industry and tax factors of REIT registration.

4 Lower-rated securities are subject to additional credit and default risks.

5 Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise. Risks associated with preferred securities differ from risks inherent with other investments. In particular, in the event of bankruptcy, a company’s preferred securities are senior to common stock but subordinated to all other types of corporate debt.

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Income Strategies

Fixed-income investment options, including those that invest in mortgage securities, are subject to interest rate risk, and their value will decline as interest rates rise. Neither the principal of bond investment options nor their yields are guaranteed by the U.S. or any other government entity. Lower-rated securities are subject to additional credit and default risks. International investing involves increased risks due to currency fluctuations, political or social instability, and differences in accounting standards. REIT securities are subject to risk factors associated with the real estate industry and tax factors of REIT registration.

Risks associated with preferred securities differ from risks inherent with other investments. In particular, in the event of bankruptcy, a company’s preferred securities are senior to common stock but subordinated to all other types of corporate debt.

Income from municipal bond holdings may be subject to state and/or local taxes, and it may be subject to federal alternative minimum tax (AMT) for certain investors.

An MLP that invests in a particular industry (e.g., oil and gas) may be harmed by detrimental economic events within that industry. As partnerships, MLPs may be subject to less regulation (and less protection for investors) under state laws than corporations. In addition, MLPs may be subject to state taxation in certain jurisdictions, which may reduce the amount of income paid by an MLP to its investors.

Seeking Preservation

Short DurationHigh Quality

Core Bond Spread Yield AlphaNon Core

Striving to Maintain Value Enhancing Alpha Potential

1-3 Year Duration

AAA/AA Rated Bonds

Cash Equivalents

Investment-Grade Corporate Bonds

Municipal Bonds

Agency Securities

Mortgage-Backed Securities

Multi-Sector/Strategic Bond Funds

High-Yield Bonds

Preferred Securities

Real Estate Investment Trusts

Master Limited Partnerships (MLPs)

Emerging Market Debt

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Income Strategies

Glossary of Terms:

AAA/AA Rated Bonds: A ratings grade given to bonds indicating their credit quality. AAA and AA-rated bonds are considered “high-quality investment grade” by Standard & Poor’s.

Agency Securities: Debt securities issued by U.S. government-sponsored entities and federally related institutions.

Alpha: The excess return of an investment relative to that of its benchmark index.

Corporate Bonds: Debt securities issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations.

Emerging Market Debt: Debt securities issued by governments or corporations in developing countries.

High-Yield Bonds: High paying bonds with lower credit ratings than investment-grade corporate bonds, Treasury bonds, and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment-grade bonds.

Investment Grade: A rating given to a bond indicating that it has a relatively low risk of default.

Master Limited Partnerships: Publicly traded securities in partnership engaged in the production and transportation of natural resources, such as oil and gas.

Mortgage-Backed Securities: A type of asset-backed security that is secured by a mortgage or collection of mortgages.

Multi-Sector/Strategic Bond Funds: Fixed-income funds that invest in different types of bonds, such as corporates and municipals, or that seek to invest in multiple fixed-income sectors.

Municipal Bonds: Debt securities issued by a state or local government entity to finance capital expenditures.

Preferred Securities: A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred securities generally have dividends that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.

Real Estate Investment Trusts (REITs): Securities that sell like stocks on the major exchanges and invest in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Short Duration: Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Short-duration securities are typically investments that have duration of less than three years.

Before investing, you should carefully consider a fund’s investment objectives, risks, charges, and expenses. Contact your financial professional, visit principalfunds.com, or call 800-222-5852 to obtain a prospectus containing this and other information. Read the prospectus carefully before investing.

A mutual fund’s 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 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.

MM4787H | 11/2010 | t1010270409

©2010 Principal Financial Services, Inc.

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