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The Principal Adds Qualified Longevity Annuity Contract Status to Deferred Income Annuity

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In response to new regulations from the Treasury Department, the Principal Financial Group(R) has enhanced its deferred income annuity product, making it available as a qualified longevity annuity contract (QLAC). The Principal(R) is one of the first companies in the industry to offer this enhancement, which allows individuals the opportunity to extend their retirement savings.

Currently, with traditional IRAs and qualified retirement plans, individuals typically must begin taking required minimum distributions (RMDs) no later than age 70 1/2 . By purchasing a QLAC, they can defer the distribution of a portion of their qualified assets, reducing RMDs until a later date (up to age 85).

“We support the new regulations and commend Treasury for recognizing the importance of guaranteed income in one’s retirement security. Millions of Americans are living longer, entering retirement with higher levels of debt and facing a future that likely includes material health care expenditures,” said Jerry Patterson, senior vice president of retirement and investor services at The Principal. “Anything that helps them strengthen their safety net for the later years of their lives will increase the chance that they do not outlive their incomes. Deferring distributions for even just five years can have a definite impact on retirement savings by reducing required minimum distributions and taxes-and in turn generating income later in retirement.”

Longevity annuity contracts are specifically designed to provide income in later years. For individuals who have access to other assets, the new regulations allow them to defer receiving income from a portion of qualified assets to a later date when they may need those dollars the most.

Reducing RMDs may benefit individuals in a variety of ways, including:

  • Allowing them to delay paying taxes on money they don’t need in early retirement.
  • Giving them the potential to leave more assets for a surviving spouse or heirs.
  • Assisting them in managing their assets, helping to ensure they have income for later in retirement.

“With 10,000 Baby Boomers hitting 65 every day, we need to continue to develop solutions that help them build and maintain an appropriate security net that will be with them until the end. For many Americans, running out of money-especially later in life-is one of their greatest fears. Our QLAC solution is a powerful new arrow in our quiver designed to help Americans enjoy a more safe and secure retirement,” Patterson said.

For more research, analysis and insights from The Principal(R), visit The Principal Knowledge Center and connect with us on Twitter.

About the Principal Financial Group
The Principal Financial Group(R) (The Principal(R))1 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500(R), the Principal Financial Group has $519.3 billion in assets under management2 and serves some 19.7 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

1 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
2 As of Dec. 31, 2014.

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