1. Important information for financial professionals
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2. What is your tax strategy?
[Note to speaker: Keep this slide up until you start the meeting. Otherwise you’ll get a lot of questions about signing in – attendees not knowing the contract number or your name.]

3. Sign in to the meeting now:
What is your tax strategy?
Welcome – and thanks for joining me today.
How many of you woke up this morning excited to talk about taxes? I’m guessing not many. That’s ok.
The only time I get excited about taxes is when they’re lower than the year before.
And, that’s what we’re going to talk about – reducing your tax burden today and throughout your retirement.
Let’s get started by signing in to the meeting.
Sign in to the meeting now:
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4. Sign in to the meeting now:.
Information from you
Name:
First Name
Last Name
Plan #:
[Insert Contract #]
Who’s leading
your meeting?
[Insert RES Name]
Do you need help with a prior plan?
401(k) from a past employer?
If yes, you can call
[Note to speaker: Add contract number and RES presenter for each meeting; let participants know if they indicate that they have other savings or income accounts from a previous employer. If they want to explore their rollover options, the can call
Sign in to the meeting now:
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5. Understanding tax speak
Deductions
Credits
Let’s get started by going over a few key tax terms: deductions (now larger for 2018) and credits.
In IRS-speak, your spouse, your children and you are able to reduce a certain dollar amount from your taxable income with either standard deductions or itemized deduction if larger. These work similar to how exemptions have in the past (allowing you to deduct a certain dollar amount from your taxable income). Itemized deductions for 2018 may include: State and local taxes, including real estate up to $10,000, interest on mortgage payments based on interest for first $750,000 of the loan, and charitable contributions are just some of the many itemized deductions that may be available to you.
Other itemized deductions have also been removed:
Losses due to theft
Unreimbursed employee expenses
Tax preparation expenses
Moving expenses
Employer-subsidized parking
And you may have credits. You receive credits for expenses such as childcare, certain college costs, certain adoption costs and more. Unlike deductions, credits are deducted from your actual taxes due (dollar for dollar), rather than from your taxable income.
can reduce amount of taxable income
subtracted from tax amount due

6. Adjusted gross income (AGI)?
What do you pay taxes on?
Gross income
Adjusted gross income (AGI)
Taxable
income
Next, let’s discuss WHAT you’re taxed on…your income.
You’ve probably heard the term gross income. It includes just about every form of income you can imagine…from your base pay and bonuses to gains from taxable mutual funds and savings.
Your adjusted gross income, or AGI, is your gross income minus adjustments from things like contributions to a health savings account or a student loan.
And taxable income is what you're left with when you subtract certain exemptions and deductions. Taxable income is the income used to determine how much tax you will pay.

7. Federal income tax/taxable income
How much will you pay?
If taxable income is over
But not over
The tax is: $0
$19,050
10% of the amount over $0
$77,400
$1,905 plus 12% of the amount over $19,050
$165,000
$8,907 plus 22% of the amount over $77,400
$315,000
$28,179 plus 24% of the amount over $165,000
$400,000
$64,179 plus 32% of the amount over $315,000
$600,000
$91,379 plus 35% of the amount over $400,000
No limit
$161,379 plus 37% of the amount over $600,000
Example for illustrative purposes only. This tax table is for a married person filing jointly for the 2018 calendar year from the instructions.
Now that you know WHAT you pay taxes on…let’s take a look at HOW MUCH you’ll pay.
How do we figure that out?
Well, the amount of tax you pay is determined by your taxable income, your credits and your Federal tax bracket.
Let’s consider a couple with a taxable income of $121,000. According to their tax bracket, they would owe approximately 15 percent of their total income – or a little less than $19,0001.
Keep in mind that amount doesn’t factor in any credits, which could save them money.
<Go through slide in greater detail if needed/preferred.>
When you determine how much tax you’ll pay now and in the future, be sure you:
-consider your tax rate (tax bracket)
-factor your exemptions and deductions into your taxable income, and
-are aware of any credits you’re entitled to claim
1 A married person filling jointly for 2018 paid taxes according to the $77,400 to $165,000 tax bracket.
Couple with $121,000 of taxable income pays:
Income tax rate is 15.3%
Federal income tax/taxable income
$8,907.00
+ $9, (22% of the amount over $77,400)
= $18, in federal income tax

8. The average refund in 2017 was$
The cost of your tax refund
The average refund in 2017 was
$2,895!2
Tax bill…or tax refund – that’s what we’ll cover next. If you’re like most, you got a refund last year. The average refund in 2017 reporting was over $2,8002.
That sounds like a good amount of “found money” for a vacation or home improvement, doesn’t it? I’m guessing we can all appreciate that!
However, let’s think of it another way….
The money returned to you as a refund is money the government withheld from your paycheck – which means the IRS didn’t pay you any interest on it.
So, it’s actually money that lost growth potential.
Can you fix that moving forward?
Yes. To keep the interest-related growth potential of your earnings higher, you can adjust the amount of taxes withheld from your paycheck to a lower amount.
2 As of December 29th, for-week-ending-december
2 As of December 29th,

9. Interested in changing your tax withholding?*
Contact your human resources or personnel office
Ask for Form W-4
Here’s how. Simply contact your human resources or personnel office. They can help you adjust your tax withholding and can also help you make any necessary adjustments to your W-4 to ensure your deductions are current and correct.
You can also visit irs.gov and review IRS Publication 919 which provides a worksheet to help ensure you have the proper amount of tax deducted from your paycheck.
One factor you may want to consider:
If you and a spouse both work, ask your tax advisor about allowances for family members. You could fall short on taxes and get hit with an underpayment penalty on taxes due if you both take full deductions.
With tax changes for 2018, suggest doing some advanced planning so you’re not surprised when filing your 2018 tax return.
Include exemptions and allowances that accurately reflect your tax situation
* See instructions for IRS Form 1040 related to a penalty you may owe for underpayment or not making timely estimated tax payment.

10. Tax-smart retirement savings
Qualified retirement plans and individual retirement accounts (IRAs) are naturally tax-advantaged
Ordinary income taxes vs. capital gains taxes
Stay invested
Let’s assume you received a tax refund last year. Are you required to spend that “found money”? No.
Undoubtedly – a vacation or new furniture for your home would be great, but what if you’re wanting that money to do more for you?
One option is to invest it for your retirement through a traditional IRA.
Any growth can be tax-deferred until you begin to take withdrawals. Keep in mind that you’ll pay income taxes on any withdrawals.
Another option is to invest it into individual stocks or mutual funds OUTSIDE of a qualified retirement plan or IRA. Earnings on these investments are taxed as they occur.
Gains on capital investments trigger a capital gains tax for most people if the investment has been held for at least a year.
The bottom line – investing “found money” from tax returns for your retirement puts the money to work for you. Just be sure to understand how your investments are taxed.
Taxation of long term capital gains - long-term capital gains are taxed at more favorable rates than short-term gains. Short-term capital gains are taxed as ordinary income, which means your marginal tax rate will apply to your short-term gains as well.
Meanwhile, long-term capital gains are taxed at one of three potential rates -- and all are much lower than the corresponding marginal tax rates. A 0% long-term capital gains tax rate applies to individuals in the two lowest (10% and 15%) marginal tax brackets. A 15% long-term capital gains tax rate applies to the next four brackets -- 25%, 28%, 33%, and 35%. Finally, a 20% long-term capital gains tax rate applies to taxpayers in the highest (39.6%) tax bracket.
It's also important to remember that certain high-income taxpayers pay an additional 3.8% net investment income tax, which kicks in above certain income thresholds.

11. $ Tax considerations in retirement
Will my Social Security payments be taxed?
What will my tax bracket be in retirement?
Which retirement investments should I tap into first?
When we talk about taxes, most of us tend to think in the present. Let’s take a moment to think about your taxes in the future. Whether you’re nearing retirement or still have years to go, it’s important to know that taxes will play a role in determining your retirement income.
A few important questions to consider are: <read slide>
The answers for these questions may be different for each of us…so the best thing to do is talk with your tax advisor or financial professional about your specific situation.
Your tax bracket will determine if your Social Security payments will be taxed, so take the time to determine what your tax bracket may be in retirement.
And, in general, it’s best to take income first from investments (like mutual funds) where the growth is taxable. Why? Because tax on those investments may be less than your ordinary income tax rate that would apply to withdrawals from your tax- deferred accounts (like a traditional IRA). And leaving your tax-deferred accounts untouched allows them to keep growing.

12. Distribution options at retirement
Taxation
Pros
Cons
Lump sum withdrawal
Pay income tax on entire pre-tax amount
Immediate access to retirement funds
Potential for higher tax bracket
May outlive income
Early withdrawal penalties1
Leave it as-is
Potential tax- deferred growth
Pay income tax on withdrawals from tax-deferred account balance
Potential tax-deferred growth
Possibly a lower tax rate
Stretches retirement income
Remains under previous employer’s retirement plan terms and conditions
Your approach to taxes (or your “tax strategy”) can also help you determine the best way to distribute your savings once you retire…and ultimately maximize your retirement income.
For contributions held in your employer’s retirement plan you can:
• take a lump sum, or
• keep the retirement funds in the plan
Let’s take a quick look at your options, how each is taxed and some pros and cons <go through slide content>
LUMP SUM: If you take the retirement funds as a one-time withdrawal, the entire amount will be taxed as ordinary income (compensation from employment, interest, dividends, or net income from a sole proprietorship, partnership or LLC) and could put you in a higher tax bracket.
KEEP THE FUNDS IN THE PLAN: If you leave your retirement funds where they are, you may gain the advantage of potential tax deferred growth and may have a choice of withdrawal options. For example, you could take payments as needed or take withdrawals on a set schedule. By withdrawing the contributions in smaller amounts, you may reduce your overall tax liability.
1 If prior to age 59½ or age 55 and separated from service.
You should consider the differences in investment options and risks, fees and expenses, tax implications, services and penalty-free withdrawals for your various options. There may be other factors to consider due to your specific needs and situation. You may wish to consult your tax advisor or legal counsel.

13. Rollover options at retirement
Taxation
Pros
Cons
Traditional IRA rollover
Potential tax- deferred growth
Pay income tax on withdrawals from tax-deferred account balance
Potential tax-deferred growth
Possibly a lower tax rate
Stretches retirement income
Potential for higher account fees and investment expenses compared to remaining in plan
Roth IRA rollover from Traditional IRA
Pay income tax on rollover amount
Tax-free withdrawals2
Rolled-over amount can put you in higher tax bracket first year
Another option is to request your employer roll your balance directly into a traditional IRA or Roth IRA. Let’s take a look at both of these:
TRADITIONAL IRA: This allows you to take periodic withdrawals, potentially reducing your federal tax liability each year. You’ll pay ordinary income taxes on withdrawals. However, if you’re like many your tax bracket may be lower in retirement than it is now.
ROTH IRA: A person who’s contributed the maximum allowed to a qualified plan or who has sizeable investments outside the plan may be in a higher tax bracket in retirement. In this case, rolling over qualified assets to a Roth IRA might be the answer. Although Roth IRA withdrawals are generally tax-free, you will have already paid ordinary income tax on the amount initially rolled into it.
A Roth IRA also allows you to keep the money there for as long as you live without penalty. This may be an advantage over traditional IRAs and other qualified retirement plans — which generally require you to begin taking withdrawals by age 70½ or face a 50% IRS penalty on the amount of the required distribution not taken, along with the taxes. Generally, required minimum distributions from a qualified retirement plan can be delayed until you retire if you’re not a 5% owner of the company.
It may be a good idea to meet with a tax or legal advisor to make sure you understand potential taxes associated with rolling assets to an IRA or taking a lump sum distribution.
2 When account is owned for at least five years and payment or distribution is made on or after the date you reach age 59½ because you are disabled, in the event of your death or when meeting the requirements listed under First-Time homebuyer exceptions (up to a $10,000 lifetime limit).
You should consider the differences in investment options and risks, fees and expenses, tax implications, services and penalty-free withdrawals for your various options. There may be other factors to consider due to your specific needs and situation. You may wish to consult your tax advisor or legal counsel.

14. ! Important points to remember
Pre-tax contributions to a qualified retirement plan can reduce your taxable income
Time and compounding have the potential to help grow your retirement savings
Taxes will impact your retirement income*
We’ve covered a lot of ground today.
My hope is that you feel better informed about the role taxes play in your overall financial picture – both now and in retirement. And, that you have a better idea of how to shape your tax strategy.
Be sure to remember these important points as you plan for retirement and manage your income during retirement.
• Your retirement plan contributions can reduce your taxable income today – and may help you ensure a more secure retirement.
• Time and compounding have the potential to help grow your retirement savings. The more you contribute today, the better off you’ll be tomorrow. Investing “found money” from tax returns really can make a difference.
• Taxes WILL impact your retirement income. Take the time NOW to determine what your tax bracket may be in retirement – and talk to your tax advisor or financial professional to learn more about your specific situation.
* Distributions from pre-tax retirement funds are subject to federal and possibly state taxes

15. Local IRS Taxpayer Assistance Center
Internal Revenue Service (IRS) contact information
Local IRS Taxpayer Assistance Center
irs.gov
As I mentioned before, if you’d like more information about taxes you can contact your tax advisor or financial professional. Or, you can contact the IRS through a number of avenues.
For general questions and tax forms, you can go to irs.gov.
And, their national toll-free number is
Or, you can look up the number for your local IRS Taxpayer Assistance Center.

16. Questions?
As we wrap up our time together, I’m going to leave you with one final thought…Your financial challenges are fluid; they change as your life changes – both now and in retirement. So, it’s important to think about and develop a tax strategy that meets your goals — and to review your strategy and goals often.
We understand that and are committed to working with you to develop individual strategies to meet your unique goals.
If you have questions, you can ask them now. Or, we can visit 1-on-1 once we’re done as a group.
Any questions now?
Thanks for participating today.

17. Disclosures
This document is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.
The subject matter in this communication is educational only and provided with the understanding that Principal® is rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA
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 an information storage and retrieval system, without prior written permission from the Principal Financial Group®.
Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
PT | 08/2018 | | ©2018 Principal Financial Services, Inc.