1. Principal Deferred Income AnnuitySM
Training

2. Agenda Why deferred income annuities?
Profile of a deferred income annuity client
Principal Deferred Income Annuity
For financial professional use only. Not for distribution to the public.

3. Why consider deferred income annuities?
Provide a future income stream for life
Peace of mind — income payment stability helps to cover essential expenses
Tax advantages of nonqualified annuities
No market risk with a deferred income annuity; ability to be more aggressive with remaining assets in portfolio
Flexibility of annuity income options
Can choose from optional inflation protection riders
Can purchase as a qualifying longevity annuity contract*
*Some restrictions apply.
Purchasing a deferred income annuity may result in a loss in potential future earnings as well as some liquidity. In exchange for this, there is reduced risk of loss due to a market downturn and guarantees a future income stream. For financial professional use only. Not for distribution to the public.

4. A typical deferred income annuity client…
Desires to supplement existing retirement funds
Is concerned about outliving assets
Wants to start receiving lifetime income at some point in the future
Is looking for adequate future income but is uncomfortable with potential market volatility
Is interested in reducing required minimum distributions (RMDs) for a period of time
Has adequate liquidity from other sources besides those funds earmarked to use for potential deferred income annuity premium payment
For financial professional use only. Not for distribution to the public.

5. Qualifying Longevity Annuity Contract
The Principal Deferred Income Annuity is available to purchase as a qualifying longevity annuity contract (QLAC)*
This allows an individual to defer the distribution of a portion of qualified assets beyond 70½ – up to age 85–reducing their RMDs until a later date
QLAC may not be available in all states
*Certain restrictions apply
For financial professional use only. Not for distribution to the public.

6. Features Variety of benefit options: Life income
Life income with guarantee period (between 5 and 30 years)*
Life income with cash refund
Life income with installment refund*
All options available for both single life and joint and survivor life.
*Not available when purchased as a QLAC. Guarantees are based on the claims-paying ability of Principal Life Insurance Company. For financial professional use only. Not for distribution to the public.

7. Features Maximum issue ages Nonqualified: 0-93 (i.e., up to age 94)
QLAC: 0-82
For single life, owner and annuitant must be the same (unless non-natural owner)
For joint life, owner and annuitant don’t need to be the same; however, the owner must be one of the annuitants (e.g., qualified contract with single owner and joint life option, owner would need to be one of the joint annuitants)
Joint owner/annuitant must be spouses
No annuitant changes are allowed
No ownership changes are allowed on qualified contracts
Ownership changes allowed on nonqualified contracts
For financial professional use only. Not for distribution to the public.

8. Features Income payment deferral period:
Minimum deferral period is 13 months
Maximum deferral period
Nonqualified – earlier of 30 years from the contract issue date or age 95
Qualified – earlier of 30 years from the contract issue date or age 70 ½
QLAC – earlier of 30 years or the first day of the month following the owner reaching age 85
For financial professional use only. Not for distribution to the public.

9. Features Income payment frequencies
Monthly, quarterly, semi-annual or annual
Selected at issue and cannot be changed
Income start date
Selected at contract issue
Can make a one-time adjustment during the deferral period (based on the income start date change guidelines)
For financial professional use only. Not for distribution to the public.

10. Income start date adjustment
The client may make a one-time change to the income start date, allowing him/her to accelerate or defer the date.
May accelerate by up to 5 years from the original income start date (provided it is no sooner than 13 months after the latest premium payment)
May defer up to 5 years from the original income start date (must be within the maximum deferral period limits)
For internal and financial professional use only. Not for distribution to the public.

11. Contribution limits
Minimum contribution: $10,000 for qualified and nonqualified contracts
Subsequent minimum contributions: $2,000 (must be at least 13 months prior to income start date)
Maximum contribution: $2,000,000 for qualified and nonqualified contracts
$5,000,000 with home office approval
QLAC: premium is limited to the lesser of $125,000 or 25% of total IRA balances as of prior year-end (12/31), excluding Roth and Inherited IRAs*
*The dollar limit applies across all qualified retirement plans and IRAs (excluding Roth and Inherited IRAs) collectively. The percentage limit applies to each qualified plan separately and to IRAs on an aggregate basis. There are restrictions on how premium limit rules can be applied. There are also restrictions on how qualified plan assets can rollover to a QLAC. It is the client’s responsibility to ensure QLAC premium limitations are met For financial professional use only. Not for distribution to the public.

12. QLAC premium limit examples
Example #1: Assume the individual has a total eligible IRA balance of $200,000 as of prior year-end (12/31)*
12/31 IRA value: $200,000 x 25% = $50,000
In this scenario, because the 25% calculation is less than the $125,000 maximum, the client has $50,000 eligible to purchase a QLAC
Example #2: Assume the individual has a total eligible IRA balance of $800,000 as of prior year-end (12/31)*
12/31 IRA value: $800,000 x 25% = $200,000
In this scenario, the $125,000 maximum premium limit would come into effect
Since maximum premium limit rules are the lesser of $125,000 or 25%, this client would have $125,000 eligible to purchase a QLAC
*Roth and Inherited IRAs cannot be included when calculating QLAC eligibility. For financial professional use only. Not for distribution to the public.

13. Death benefit
During the deferral period, the death benefit is return of premium:
If joint ownership, the death benefit is paid upon the second to die; if the surviving joint owner is the spouse, he/she must continue the contract
If ownership change is made, the death benefit is paid upon the death of the original owner (second to die, if joint owners)
After the income start date, the death benefit is determined by the annuity income option elected.
For financial professional use only. Not for distribution to the public.

14. Income payment advancement feature
Automatically issued with every nonqualified contract with a monthly income payment frequency (subject to state availability)
Not available on qualified contracts, including QLAC
No additional cost
Available to exercise after income start date
Allows the client to receive up to 6 income payments lump sum in advance; limited to 4 requests over the life of the contract
Income payments must resume for at least one month before this option may be exercised again
Client must be at least 59½ to exercise
For financial professional use only. Not for distribution to the public.

15. Here’s an example of the income payment advancement feature.
Client’s monthly income amount is $500
Client elects to receive 4 monthly income payments in advance
Client receives 4 x $500 = $2,000 lump sum payment
For financial professional use only. Not for distribution to the public.

16. Inflation protection riders
Clients have the choice of the following optional cost of living riders (applies only during the income phase):
Annual Increase Rider
Consumer Price Index (CPI) Rider
Neither are available when purchased as a QLAC
For financial professional use only. Not for distribution to the public.

17. Annual Increase Rider Optional Not available when purchased as a QLAC
Available at issue
No additional fee
Automatically increases payments each year
Choose from 1%, 2%, 3%, 4% or 5%
For financial professional use only. Not for distribution to the public.

18. Consumer Price Index (CPI) Rider
Optional; available at issue
Not available when purchased as a QLAC
No additional fee
Opportunity to increase payments
Based on the Consumer Price Index for All Urban Consumers (CPI-U) percentage change for the past year
Income payment calculated on the anniversary of the first income payment
No limit on total increases over life of the contract
If change is negative, payments will not decrease; payments remain the same until a future year’s CPI-U increases to offset previous negative year’s or years’ change(s)
For financial professional use only. Not for distribution to the public.

19. Consumer Price Index (CPI) Rider example
Assume: Initial income payment amount of $500/month Starting CPI-U Index Value of 100
Contract anniversary
CPI-U index value
CPI-U% change from initial payment
Payment change % from initial payment
Income payment
At Issue
100
$500 1
103
3.00%
$515 2 98
-2.00% 3
105
5.00%
$525 4
110%
10.00%
$550
For financial professional use only. Not for distribution to the public.

20. Contract rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to rider for full details.
Withdrawals prior to age 59½ may be subject to a 10% IRS penalty tax. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group®.
Not FDIC or NCUA Insured
May lose value · Not a deposit · No bank or credit union guarantee
Not insured by any Federal government agency
Insurance issued by Principal Life Insurance Company, a member of the Principal Financial Group®, Des Moines, IA
For financial professional use only. Not for distribution to the public.
PD | © 2016 Principal Financial Services, Inc. | t t3 | 08/2016