1.plan ahead SPRING 2010 get ahead youR ReSouRce foR RetIRemeNt SavINGS retirement INCOMEMAKE THELIFE TIPS THAT MAY FOR IMPOSSIBLE DREAM A SWEET REALITY 4 real-time RETIREMENT HELP 1 UnDerStanDinG BOnDS 3 12 mOney miStakeS TO AvOID 7 PROTECT YOuR rainy Day FuND 10Jeanne Dwyers sudden jobloss proved serendipitouswhen it prompted her to mapout her unexpected retirementin earnest.

2. Act now!Help set the stage for amore comfortable retirement. even a modest increase in your contributionweb site or mail the attached reply card. to your employers retirement plan could Remember, you can help make a difference mean a boost to your nest egg. call andin your retirementif you act now. (cue speak to one of our representatives, visit our the applause.) ReductIoN IN addItIoNalPRojected extRatake-homecoNtRIbutIoNSavINGS at RetIRemeNt Pay PeR week 3%$17.31$18,100 4%$23.08$24,100 5%$28.85$30,200 7%$40.38$42,200Dont wait! Call 1-877-788-7242, ext. 41872, visit principal.com/3StepUpSavings or return the attached card today.this example is for illustrative purposes only. the assumed rate of return inthis chart is hypothetical and does not represent the return of any particularinvestment option. this chart assumes a 25% tax bracket, which includes local,state and federal taxes. also assumes $40,000 in annual income, 10 years toretirement and an annual 8% rate of return. 2010 Principal financial Services, Inc. 3. Financial professionals are sales representatives for the members of the Principal Financial GroupwelcomePLAN AHEAD. GET AHEAD. SPRING 2010 (The Principal). Except under certain circumstances, they do not SMaRt MOVeS tO MaKe represent, offer or compare prod- ucts and services of other financial services organizations. Insurance products and plan administrative services are pro- vided by Principal Life Insurance 1 Company. Securities are offered through Princor Financial Services Corporation, 1-800-547- 7754, member SIPC. Princor CONdUCt a teCh CheCKUP and Principal Life are members of the Principal Financial Group Review your costs for phone, expanded cable and Internet services, then shop (The Principal), Des Moines, IA 50392. around for savings. According to Consumer Reports magazine, savvy shoppers Plan Ahead. Get Ahead. can save hundreds a year by consolidating all three services with one provider. is a registered service mark of Plans can be difficult to compare so do your homework. And be aware that Principal Financial Services, Inc., a member of the Principal bundling may not make sense if, for example, you do little long-distance calling Financial Group. The articles and or watch only basic TV. opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for 2 3 any individual.2010 Principal Financial Services, Inc. 2010 Meredith StaY CONNeCted get ReaL-tIMe heLP Corporation. Products and services are Did you know you can haveCheck out our online source offered through the Principal Financial Group and its subsidiar- account updates from The for retirement planning, My ies. Not all products and servicesPrincipal show up automati- Principal Edge Milestones, described are available in all states cally on your iGoogle home at principal.com/planahead/ of the USA, or elsewhere in the world. Bank products and services page? See how at principal.createplan.* It can help you provided by Principal Bank, com/planahead/signup. Or get identify shortfalls in retirement FDIC insured. Annuities, weekly email or text message savings and recommend next Insurance, Retirement Plans, Mutual Funds and Otherupdates on the day of the week steps for closing the gap. Securities are not insured by the and at the time you designate. *Not available online to all participants FDIC, are not obligations or deposits for Principal Bank nor guaranteed by Principal Bank and involve risk, including the possible loss of principal invested. 4 5 While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is WaRM UP WINteR Beat the IRa intended to provide general infor-SaVINgSdeadLINe mation about the subject matter covered and is provided with the understanding that The PrincipalInstall a programmable ther- Didnt get around to mak- is not rendering legal, accountingmostat to help beat winters ing a 2009 IRA contribution? or tax advice. It is not a marketed opinion and may not be used toheating costs (and lower sum-Theres still time. You have avoid penalties under the Internalmers air conditioning billuntil April 15, 2010, to make Revenue Code. You should consult as a bonus). According toan eligible contribution to a with appropriate counsel or other advisors on all matters pertainingenergystar.gov, that one stepTraditional or Roth IRA for to legal, tax or accounting obliga- can save a homeowner about last year. Learn more about tions and requirements. #9479122011 $180 a year. Find more energy- your options at principal.com/ saving tips at principal.com/planahead/ira. planahead/tips.EE 8397 Q110CSPRING 2010 PLAN AHEAD. GET AHEAD.1 4. your money WHATS NEWAND WHAT YOu NEED TO KNOW many happy returns If youre throwing up your hands at the notion of crunching tax-return numbers yourself, it may be time to shop for a tax preparer. Here,Did you leave a job in 2009 but keep retirement savings in your courtesy of the Internal Revenue former employers plan? Youre not the only one who can move Service (IRS), are some pointers:onyour money can too. And you have many convenient choices heck out any preparer youreCconsidering with agencies suchavailable to you, with benefits youll appreciate.as your local Better Business For example, did you know that with a direct plan-to-planBureau or the IRS Office of rollover, you need never handle the money yourself? ExperiencedProfessional Responsibility.retirement professionals can start the paperwork right over the xamine the preparersE phone and send you forms to review and sign. They also can explainprofessional affiliations andthe potential taxes and penalties you may incur if you choose tocredentials to make sure they suityour needs. For example, is the cash out of a former employers plan. Whats more, consolidatingperson accredited to representretirement assets in one place may help you avoid duplicate accountyou before the IRS? maintenance fees and lets you more easily monitor how your sk who will be doing the actualA investments are diversified.work on your return and how toPhone The Principal Client Contact Center at 1-877-788-7242,contact them. And it should goext. 45347 to learn more about your rollover options.without saying: Steer clear ofpreparers who hold out promisesor guarantees of more deductionsor larger refunds. take it toTradiTional ira the limit This year you can contribute the and roTh ira401(k) or 403(b) same maximums to your employers $5,000 (combined retirement plan or your IRA as in 2009 ConTribuTion limiTcontribution to $16,500 (see chart at right). Also unchanged isfor 2010both cannot exceed the annual gift tax exclusion, which is$5,000) the maximum you can give someone without triggering tax consequenceslimiT on addiTional ($13,000 per individual or $26,000 forCaTCh-up ConTribuTions$1,000 $5,500for Those 50 and older a combined gift from spouses). 2 PLAN AHEAD. GET AHEAD. SPRING 2010 5. Q&A to your credit randy welCh, direCTorof invesTmenT serviCes The news just keeps getting better for cardholders. The Credit Cardfor The prinCipal Accountability, Responsibility, and Disclosure (CARD) Act of 2009 wont keep your credit card company from increasing your interest rate, butfinanCial group, explains new provisions do seek to make issuers play more fairly. Among the how bonds behave.Q welcome changes: oullbenotifiedatleast45daysbeforearatejump, and youYwont see rate hikes on existing balances just because youre behind ive always heard ThaT bondson your mortgage or other payments. While retroactive rate increases go up when sToCks go downare largely banned, there are exceptions, and you could trigger one ifand viCe versa. if ThaTs True, whaTyoure 60 days late on a payment. But your lower rate can be restored happened in 2008?if you make timely minimum payments for six months. Traditional wisdom does indeed suggest that the illsnowneedtobemailedatleast21calendardays beforeB two markets behave differently. Usually when thepayment is due, and that due date must be the same day each month.economic environment/conditions are deteriorating heresnolongeranyneedtoworryaboutover-limitfees sinceT and interest rates are falling, bonds perform wellpurchases that would exceed your credit limit will be rejected unless and stocks lag. Conversely, a rising-interest-rateyou give prior authorization. environment tends to be not so good for bond tatementswillnowofferaneye-openingtutorial: IssuersS returns and better for stocks. In 2008 we had awill explain the consequences of making only minimum monthlyfalling interest-rate environment, which means wepayments, including the time it would take to pay off the entiremight have expected bonds to perform well, butbalance and the total cost. we actually saw bonds (with the exception of U.S. Note that some of these changes went into effect in 2009; the rest willTreasuries) as well as stocks drop. take effect this calendar year. The credit markets were the impetus for thedownturn, and once that happened you started tosee the consumer lack of confidence and see someprincipal.com/planahead firms go bankrupt. The ramifications of that affectednot only the fixed-income markets but moved rightinto the stock market. moniTor your mixIf a bond is coming under so much pressure Your asset allocation mix, that is. See if your mix is in line that the company cant pay its obligations, not with your risk tolerance. Take our Investor Profile Quiz atonly is that going to affect people holding the principal.com/planahead/quiz.bonds, its also going to affect the people holdingthe [companys] stock. In 2008 you started to seethat mass hysteria of [we] dont want any type ofexposure to risk, so you saw the markets kind of SaVe that tax RefUNdcapitulate with negativity. And that affected bonds,stocks, real estatejust about anything except forcash or Treasuries. Heres a painless new savings strategy, courtesy of the IRS. You can now seamlessly purchase up to $5,000 worth of Series I u.S. savings bonds using your federal tax refund. Just specify the amount youd like to buy on IRS Form 8888, which youll file with your other paperwork. The bond certificates will be mailed after the IRS processes your return. Dont plan on giving bonds purchased this way as gifts. These low-risk investments can be issued only in your name or, if youre married and filing jointly, in the names of you and your spouse.SPRING 2010 PLAN AHEAD. GET AHEAD. 3 6. WILL MYMONeYLaSt?BY GEOFF WILLIAMS PHOTOGRAPHED BY KATHRYN GAMBLEthAts the Questionthis new retireeis Asking herself.heres how she Andothers ApproAchingretirement cAnplAn A consistentmonthly incomefor life. Jeanne dwyer found herself face-to-face with the need to plan her retirement income after an unexpected job loss. 7. JEANNE DWYER CAME FACE TO FACE WITHYou can use the Retirement Estimator available atsocialsecurity.gov/estimator to ballpark your Social Secu- RETIREMENT LAST OCTOBERrity benefits and get a better picture of the trade-offs and when she was unexpectedly downsized in a company rewards of starting withdrawals sooner or later than your merger. Suddenly the 62-year-old found herself dealing full retirement age, which is somewhere between 65 and with the challenge of how to switch from a savings men-67, depending on when you were born. As an example, tality to a spending mind-set. the difference on a monthly basis might be 25 percent lessAs Dwyer, who lives in Des Moines, Iowa, discovered,than full retirement benefits if you opt for age 62 or up to thats when you have to decide how youre going to makea third more if you wait until age 70significant amounts the most of what youve already got. Ideally, thats some- for some people. thing youd have planned for with the help of a financial If you wont need the income anytime soon and youre professional in the years leading up to retirement. But, in good health, it may pay to hold off tapping Social Secu- unfortunately, many people are so focused on saving forrity for as long as you can (after age 70, theres no financial retirement that they dont consider how to manage theirincentive to delay). David Littell, a professor of taxation retirement income until retirement is suddenly upon them.who specializes in retirement issues at The American Col- Others, like Dwyer, find themselves out of the workforce lege in Bryn Mawr, Pennsylvania, says, Since [Social and facing the issue earlier than they expected. Security] is inflation-protected and provides essentially aDwyer was a vice president in charge of human joint annuity for a married couple, more of us are talking resources for a health care company. Shed helped lots oftoday about encouraging clients to defer benefits to maxi- workers come to terms with their career mortality, but mize the income stream. that didnt prepare her for the shock of losing her own A financial professional can help you determine the best livelihood several years before she intended to retire. Itsage at which to begin drawing Social Security. He or she a very scary thing when this happens to people, Dwyer can also help you figure out the best way to maximize says. You dont ever think its going to be you. benefits between you and your spouse. Much depends onDwyer and her husband now have to put pencil to your specific situationage, health and earnings (espe- paper and figure out how to live on what theyve saved.cially if one spouse has a stronger earning history). Dwyer pocketed a healthy sum when she sold a family farm last year, but her savings in her employers retirement gUaRaNteed INCOMe plan is still on the rebound. It will be a few more yearsThere was a time when most workers could count on before shes eligible for full Social Security benefits, anda traditional company pension to provide a guaranteed shed like to keep her money working for her as long asmonthly retirement income, but such pensions are increas- she can. Most important, she wants the peace of mind thatingly rare today. If youre covered by one, it may provide comes with knowing her money will never run out. you (and your spouse) a fixed amount of income for life.Fortunately there are various options for people likeFor those without a pension, an income annuity can Dwyer. The difficulty isnt so much in finding them butoffer similar security. You purchase an income (or imme-[annUi- in developing a retirement income plan that will generatediate) annuity with a lump sum the income needed to live. Usually that involves dipping of money that buys you a stream into several pots of money: Social Security, the assets in your employers retirement plan, traditional and/or Rothof monthly payments. Theyrepretty popular because they guar-tieS are] Individual Retirement Accounts (IRAs), other personal savings and investments, and perhaps a traditional pen-antee payments for life, Danfordsays. Monthly payments often start pretty sion or part-time employment.within 30 days and never end, even pOpUlar BecaUSeif you live to be 100 or more. SOCIaL SeCURItY Think about how you want to The Social Security issues cause unnecessary anguish, receive payments before purchasing says Dan Danford, who heads the Family Investment Cen- an income annuity because you do they ter in St. Joseph, Missouri. If we knew how long each have choices in how its structured. of us would live, wed just multiply the various payment Some annuities pay a fixed rate dur- GUarantee schemes over our exact lifespans and choose the highest ing your life, while others offer a paymentS fOr life. one. Since we dont, were making a best-guess estimate, lower initial payment that increases and that really stresses people out.over time to help offset inflation.**Guarantees are based upon claims-paying ability of the issuing insurance company. SPRING 2010 PLAN AHEAD. GET AHEAD. 5 8. The percenTage of workers who say They havenTyeT devised a plan for how Theyll Tap savingsin reTiremenT. Source: The Principal Financial Well-Being Index, Third Quarter 2009Littell is a fan of annuities for a portion of retirement (adjusted annually for inflation) in order to maximize theincome. If basic needs can be taken care of throughlikelihood that you wont outlive retirement savings.guaranteed income, he says, other investments can beinvested more aggressively, assuring both peace of mind get gOOd adVICeand a potential for growth on other assets.How do you know which sources of retirement income tosiphon first? When it comes to your retirement income, aPeRSONaL SaVINgSfinancial professional can help you figure out the propor-Your goal should be to tap your personal and retirement tions. You might, as an example, end up drawing approx-savings in the most efficient manner so you dont overpay imately one-third of your income from Social Security,in taxes, while at the same time making withdrawals at aone-third from a guaranteed source, such as a pensionlevel that can help ensure your retirement funds dont dryor annuity, and the final third from systematic withdraw-up before you no longer need them.als taken from your personal and retirement savings and For most people, retirement funds come in two big investments. Or you may also have income from part-categoriesmoney thats already been taxed or money time employment or from a rental. A retirement profes-that has not, says Danford. Taxable withdrawals shouldsional can help you draft a specific plan to help meetbe targeted to years with lower income and, thus, lower your needs.tax brackets. The best answer for one year might not beAs draining an experience as losing her job has been,the best in another. Jeanne Dwyer has already seen the potential of having Some experts recommend letting money that hasseveral income streams working for her. And she has timealready been taxed (in Roth IRAs, for example) perco- on her side in deciding how to tap them until shes eligiblelate as long as possible in order to allow compounding to for full Social Security benefits and Medicare. Meanwhile,potentially increase the pot. And when it comes to taxableshe received a generous severance package, and her hus-assets, much depends on what you believe will happen to band, a Vietnam vet, receives disability.overall tax rates in the years to come, something no one Dwyer already has leads on a couple of part-time or 83%can reliably predict. consulting projects that could supplement her income. She A little easier to estimate is how much you might con- plans to meet with a financial professional and is continu-sider withdrawing each year. Whether retirement savings ing to contribute to a retirement savings account out ofare in an IRA or your employers retirement plan (orher severance pay. For the time being, she says, Imboth), the Principal Financial Group encourages limit-putting as much money away as I can.ing yearly withdrawals to 4.5 percent of the total assetsNext StePSwhaT Can you do Today To help seCure a she can also help you estimate how much income youresTeady reTiremenT inCome Tomorrow? likely to require each month. If you dont have a financialRandy Bachman, Assistant vice President, Retirement professional, The Principal can connect you with one.Income Solutions at the Principal Financial Group, sug- Meanwhile, check out the valuable tools available atgests you begin by asking yourself these questions: principal.com/planahead/tools that can help you face How comfortable am I with market risk?major retirement challenges, including: Will I have a lot of ongoing expenses such as rent, The risk of outliving your savings mortgage or car payments? The risk of your savings being outpaced by inflation Will I have income from a pension plan, rental The high and rising cost of health care property or a small business?My Principal Edge Milestones at principal.com/ How important is having a lifelong guaranteed planahead/createplan may help you figure out if youre income stream to me? on track to meet your retirement goals.* Answer a few How actively do I want to manage my retirementquick questions and you can estimate the income you may savings? need in retirement and whether or not youre on track to Next, consider the help of a financial professional. achieve your goals. You can also see the potential impactThis person can help you sort through your answers to of boosting your savings rate or postponing retirement by afind solutions that make the most sense for you. He orfew years.* Not available online for all participants 6 PLAN AHEAD. GET AHEAD. SPRING 2010 9. MONeY MISStePS You know that saying, learn from yourmistakes? Its better tolearn from otherpeoples mistakes. Its less expensive.we couldnt agree more. so wepolled four financial expertsand asked them to come clean abouttheir biggest mistakes. by dave kirChnered slottCPa, hOSt Of the WeBSIte irahelp.cOm aNdaUthOR Of StaY RICh fOR LIfe!: gROWINg &PROteCtINg YOUR MONeY IN tURBULeNt tIMeS MY MIStaKe: Oh, thats easy. NotOtheR PeOPLeS MIStaKe: NotRetIReMeNt MIStaKe: Not having starting early enough to put away foropening a Roth IRA. Any young per-a financial professional who under- retirement. When I was in my 20s, Ison nowor any person, reallywhostands ways to distribute savings once worked for a small accounting firm,is not taking advantage of the Roth is you retire. Its the way you take it out and one of the guys told meyouve missing a huge opportunity to keep [at that determines how much you get to got to start putting away for retire-least some of] their retirement moneykeep and how much goes to the gov- ment. I said nah, I wont be able to tax-free. When youre in retirement, ernment. Slott is in the business of touch that money till Im 59. By then thats when you need every cent thetraining financial professionals through Ill be ready for the nursing home. most. Thats the worst possible time his IRA Leadership Program. Its an Today at age 55, Slott says hes had to have to share every dollar you take opportunity for them to learn how to to put the pedal to the metal to makeout with the government.better help their clients hold on to and up for those lost years. Now every manage their money in the distribu- time I put money away, I say I wish tion phase. I could have done that when I was in my 20s. SPRING 2010 PLAN AHEAD. GET AHEAD. 7 10. MY MIStaKe: Not staying involved.retirement rolls around and moneyWhen I first went to Wall Street as a is tight? I like to talk about this inlawyer in the beginning of my career,terms of time travel: The decision tomy husband and I decided we wouldspend today for something you wantdivide up financial responsibilities, as has an effect on the future, when youmany couples do. My husband [alsomay not be able to buy something youa lawyer] took on the task of making need. But most of us dont think of itinvestment decisions. He made some that way.quick profits and nearly abandonedhis practice to become a full-time dayRetIReMeNt MIStaKe: Not un-trader. But luckily, as it turned out,derstanding that retirement is a jointsome profits turned to losses beforeventure. In her practice, Jason tellsJUlIe JAsoN he made that crucial move, saving hislaw career and preserving our nestclients that spouses need to workalongside each other in retirement,PRINCIPaL Of jaCKSON,egg. Lesson learned: Before you takealmost as if they were running a busi-gRaNt INVeStMeNtadVISeRS, INC. aNd aUthOR the back seat on investment decisions,ness. Successful retirees view it thatOf the aaRP RetIReMeNtmake sure you are in sync on risksway; couples who dont have a muchSURVIVaL gUIdeand goals.bigger struggle. Plus, one spouse willundoubtedly predecease the other, soOtheR PeOPLeS MIStaKe: Over- both have to be prepared. Just oneconsumption, plain and simple. example: If one spouse tends to over-When you look around, you see spend, that alone can undermine thepeople acquiring things they want success of a retirement portfolio.but dont need. What happens whent decision tohespend today forsomething you want has an effect on the future, when you may not be able to buy something dAllAs sAlIsBURY you need.PReSIdeNt aNd CeO, eMPLOYee BeNefIt ReSeaRCh INStItUte (eBRI)MY MIStaKe: My biggest blunderOtheR PeOPLeS MIStaKe: Au-is just not having saved enough earlytomatically assuming that all of theenough. Having just turned 60, Salis- investment advice you see in the me-bury sees with hindsight that it would dia pertains to your situation. Itshave been better to gradually double not one size fits all, Salisbury says.his savings rate between the ages of People really need to ask the ques-20 and 40, instead of having to qua- tion: Does this apply to me? Hedruple it at 40. He says that, althoughpoints out that among workers withhe and his wife have always been sav-employer-sponsored retirement plans,ers, it wasnt until about age 40 that nearly 60 percent have total assets ofthey started putting actual numbersless than $20,000. Advice that applieson future costs such as health care andto individuals with high net worthslong-term care.is one thing. But, Salisbury says, ask8 PLAN AHEAD. GET AHEAD. SPRING 2010 11. MY MIStaKe: Its pretty easy forgest problem after a washout like we me to identify that one, Tyson says.had in the financial markets is that Not doing due diligence on the com- people become risk-averse precisely at panies you do business with. In the the time when they should be taking early 80s and fresh out of college, hemore risk. When stocks were down found himself with a couple thousand 50 percent globally, werent they dollars to invest. Having seen ads inless risky than they were just a few The Wall Street Journal and The Newyears earlier? York Times for a firm that traded in gold bullion, he jumped onboard. RetIReMeNt MIStaKe: Watching And lost every cent. The next thing I the retirement plan balance sink and knew, it was all over the news that thethen trying to rebound by timing the company had been shut down. Basi-market. Tyson says that whenever cally it was a fraud and a scam. This theres a downturn, pundits surface, taught Tyson at a young age that justclaiming they predicted the collapse because a companys ads may appear and promising they can help you avoid in respected publications, you still future calamity by following their ad- have to do your homework.vice on when to buy and when to sell.The biggest danger is that people will OtheR PeOPLeS MIStaKe: I dont throw out time-proven meth- have hard data to back it up, but my ods of investing and will latch sense is that the biggest mistake peo- onto a guru like that. Nobody has ple are making today is letting past a crystal ball. I just see too many years events color their view of thepeople trying to time the future. Coming off of a reversal like market, and theyre in- weve just gone through, Tyson says, evitably going to be its easy to retrench and miss out ondisappointed. t biggest problem he investment opportunities. The big-after a washout like we eRIc tYsoN had in the financial markets SYNdICated COLUMNISt aNd aUthOR Of the BeStSeLLINg BOOK, is that people become risk - PeRSONaL fINaNCe fOR dUMMIeS averse precisely at the timewhen they should be taking more risk. What we know from the data isthat the vast majority arent saving enough,and clearly theyre yourself this: If Im moderate income,investment allocation and low assets, low savings rate and low they may not even open not planning. net worth, should I really be taking their statements. The EBRIs the same level of total portfolio risk most recent Retirement Confi- as this other person?dence Survey contains the sobering statistic that, even at retirement, only RetIReMeNt MIStaKe: Not pay- 44 percent of workers say theyve ever ing attention, Salisbury says. By that made any attempt at calculating how he means that too many workers much money theyll need to retire. dont regularly monitor and increase What we know from the data is that the percentage of their pay that they the vast majority arent saving enough, contribute to their employers retire- and clearly theyre not planning. ment plan, they dont re-evaluate their SPRING 2010 PLAN AHEAD. GET AHEAD. 9 12. your edgeKEYS TO HELP MAKE YOu A SuCCESSFuL SAvER tlc for your rainy day fundThe skittish economy has prompted many of us to reserve even more ready cash. Experts traditionally recommend an emergency fund of three to six months of living expenses. But today, depending on family circumstances, some people feel more comfortable with a years worth. With an emergency fund of that size, its important to seek the best available rate of return while still maintaining safety and liquidity. Here are some things to consider: afety. Savings accounts and CDs are insured by the Federal Deposit S Insurance Corporation (FDIC), and most credit union accounts are covered by the National Credit Union Administration (NCUA). Money market mutual fund accounts are not insured by the FDIC.* iquidity. You probably wont need all of your emergency cash at once, so L it may make sense to put some in accounts you can access immediately and the rest in short-term-maturity CDs for a better overall rate of return. ateofreturn.Compare rates at online banks as well as your bricks-and- R mortar bank and credit union. Sites such as bankrate.com can help you comparison-shop. * FDIC & NCuA limits the insured amount to $250,000 per depositor, per insured bank/credit union from 10/3/2008 through 12/31/2013. After 12/31/2013, the insured amount may return to $100,000. a SMaRt WaY tO StaggeR CdS Certificates of deposit (CDs) have long been a top choice for basic savings. But there is a downside: You lock up your money for the term of the CD. And in todays rock-bottom interest rate environment, what if rates begin to trend upward?A divide-and-conquer approach called laddering offers flexibility. Heres an example of how it works: Lets say you divide up your money into five equal pots and put 20 percent into a59%PERCENTAGE OF WORKERS WHOSAY THE ECONOMY HAS LED THEM TOCuT BACK ON TOTAL SPENDING OvER one-year CD at the current rate, another 20 percent into a two-THE LAST TWO MONTHS. year CD and so on. Your last 20 percent will go into a five-year CD. When the first CD matures in a year, reinvest in a five-year What it means to you: Although this figure indicates the CD at the current rate. Do the same with the two-year CD wheneconomy is still a top-of-mind concern, its appreciably it matures. Given todays low rates, you might want to start out lower than it was even three months ago. This increase in with even shorter maturities. The key in either case is to reinvestconsumer confidence is one signal that the economy may for the same interval so youll have some money periodically indeed be on the rebound. available to reinvest for a greater return if interest rates rise. Source: The Principal Financial Well-Being Index, Third Quarter 2009 10 PLAN AHEAD. GET AHEAD. SPRING 2010 13. principal points OverlookedWHAT yOUr Statement IS TELLING YOu InsuranceNeeds Whether it arrives in the mail or you access it online, the statement you receive from your employers retirement plan is filled with valuable Homeowners, auto and health insurance are practically givens. information. If youre used to glancing only at the bottom line and then But here are two other coveragesfiling it away, read on for help that may improve your bottom line. that are especially important in todays economy:account balance. This area 1LifeInsurance. If your only gives you an at-a-glance look life insurance is provided by yourat the total value of savings, employer, do you know if its which can help you see if adequate to provide for all of your youre on track to reach your familys needs? You may want to retirement goals. consider a supplemental policy.sample And if you should lose your job,Rate of return. Heres where a supplemental policy may evenyoull find the percentage provide cash value you can borrow change in the value of the against in the interim. account since the previous 2DisabilityInsurance. Many statement. This rate reflects people believe their most valuablethe specific plan investment asset is their home. Actually, its options youve chosen. their income. According to the Council for Disability Awareness,educational messaging. 71% of American workers live Spending a moment in these from paycheck to paycheck, yet areas can reward you with 20% can expect to be out of work pointers on ways to help for a year or more before turningboost retirement savings, 65 due to illness or accident. news of just-added accountfeatures available online,timely plan information andmuch more.aLSO INCLUded WIthIN the StateMeNt aRe:principal.com/ account summary. This table gives you a snapshot of the contributions (yours and yourplanaheademployers, if applicable) that make up the account balance. Seeing the amount that your employer contributes continue to grow may prompt you to contribute more yourself until you secure the full company match. are you proTeCTed? Find out if your present life activity by individual investment. This is where you can track the performance of the and disability coverages are holdings in each of your elected investment options over the statement period. Just as adequate for your situation important, if youve made changes to your investment options since the last statement, in just a few clicks. Run the youll now see them reflected and can begin to monitor how theyre doing. insurance calculators at principal.com/planahead/ Investment performance. Look here for a comparison of how all of the investment insurance. options available in your employers plan have performed over time. Remember that an options past performance is not an accurate predictor of how it will do going forward. Simplify your life by signing up for online statements at principal.com/planahead/onlinestatements. SPRING 2010 PLAN AHEAD. GET AHEAD. 11 14. my wayLESSONS FROM SuCCESSFuL SAvERS RuNNING THE SavinGS MARATHON tOdaY jaCK WOLf IS aBLe tO LaUgh at some of His second smart move? Wolf realized he the investment mistakes he made early in his life. When he needed help managing his money. I decided was in his late 20s, I spent way too much money investing it didnt matter how much of The Wall Street in real estate trusts and oil wells, he says. I should haveJournal I read every day, he says. The financial just taken that money up in an airplane and thrown it outprofessional Wolf turned to helped him imple- the window. ment an investment strategy that relied on a bal-Now the 56-year-old executive with the Dallas-area Di-anced portfolio. It proved a smart move: rective Corporation is on a much surer path. In fact, hes The two have worked together for on track to realize his goal of an early retirement at age 60. 22 years. So what happened between then and now to account forOver those years, Wolf has seen such a reversal of fortune?firsthand what compounding mayTwo things, actually. Once he turned 30, Wolf had the do, so its not surprising that he V8 moment when he realized that he alone was responsible stresses the importance of de- for his financial future. I [knew] that I should not depend veloping a regular savings on Social Security, he says. IdecidedIwasntgoingtohabit early. You start early keepdoingstupidthingswithmymoney.Iwasgoing and you do whatever you tobemoredisciplinedandputwhateverIcouldput can do, whether its $25or a hundred dollars, he awayeverymonth.says. Its not a sprint. ItsThat was about the time Individual Retirement Accountsa marathon. (IRAs) became available, and Wolf began contributing to one. Soon after, he enrolled in the retirement savings plan his company had recently introduced. Now he saves theJaCk wolf believes maximum in the plan at Directive Corporation and takes that not every increasein your salary should advantage of the yearly catch-up contributions available equate to an increase in to those over 50.your lifestyle. The next issue of Plan Ahead. Get Ahead will only be available electronically! To make sure you receive yours, go to principal.com/planahead/email and log in to confirm or provide your email address. What WILL YOU dO tOprincipal.com/planaheadSaVe MONeY ON thIS YeaRS faMILY VaCatION? your inVestor profileShop more carefully for the bestairfares and hotel rates.What it says about your comfort levelStill visit favorite destinations, but When the market stumbles, do you lose sleep worrying about your investment options?travel in the off-season. Or do you take fluctuations in stride, preferring to focus on the long term? Those kinds of questions help determine your risk tolerance, something all investors should assess Take a staycation and explore periodically because it can change over timedue to age, life circumstances and your attractions close to home. retirement horizon. To see where you currently stand, take the Investor Profile Quiz at principal.com/planahead/quiz. In minutes youll be aligned to one of five hypothetical Skip this years vacation. investor profiles that can help you plan a mix of investment options. gO tO PRINCIPaL.COM/PLaNahead/POLL tO VOte aNd VIeW ReSULtS. YOU MaY ChOOSe MORe thaN ONe ReSPONSe.12 PLAN AHEAD. GET AHEAD. SPRING 2010 15. Call today!1- 877-788-7242ext. 45346 ROCK ANDROLLOVER !Tired of multiple statements and paperwork hassles from your differentretirement accounts? Roll them over to The Principal. Take center stage with a single retirement account statement and easilymonitor how investment options are diversied. Setting up an account isconvenient, easy and only takes a few minutes. We will start the paperworkover the phone and send you the forms to review and sign. Dont miss a beat on your retirement savings!Contact The Principal today at 1-877-788-7242, ext. 45346 to learn more aboutyour rollover options. A single retirement statement is sweeter than a back-stage pass to the hottest ticket in town. Call today for your rockin rollover!Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offeredthrough Princor Financial Services Corporation, 800-547-7754, member SIPC. Princor and Principal Life are members of thePrincipal Financial Group, Des Moines, IA 50392. 2010 Principal Financial Services, Inc. 16. PRSRT STDU.S. POSTAGE PAIDPEWAUKEE, WI PERMIT NO. 1179