Retirement Planning Outside the Box: Join the Peace Corps and Save More Than $88,000

(MoneyWatch)  When I'm at parties and other social gatherings and people learn I'm an actuary who writes about retirement, I hear some pretty creative retirement planning ideas, some of which I think are worth passing on to you. So this post kicks off a series that I'll publish from time to time when I hear a good idea about what you should be doing regarding your money, health, or lifestyle.

You might think the Peace Corps is just for young people, but it's for older folks as well. The organization has a special program for volunteers age 50 and over, and it's worth considering if you're the adventuresome type with an altruistic streak. Today, there are about 7,500 Peace Corps volunteers around the world, and roughly 375 are age 50 and over.

The typical service time lasts for 27 months, which includes three months for cultural immersion and language training. The Peace Corps provides its volunteers with a living allowance that enables them to live in a manner similar to the local people in their community; it covers housing, food, and incidentals. In addition, the Peace Corps pays for your health insurance. To assist with transition back home at the end of your service, each volunteer is paid a flat fee of $7,425.

So let's take a look at how your savings can add up during those 27 months. Suppose you're part of a married couple, age 65 or older, that has decided to serve together. Let's also suppose that your current utility, food, gasoline, travel, entertainment, and other basic living expenses add up to $1,000 per month.

If you're over age 65, Peace Corps service enables you to suspend Medicare Part B premiums without penalties. In 2010, Medicare Part B premiums cost $220 per month for a couple. Add in the savings you'll rack up for basic living expenses, and your total savings is $1,220 per month. Multiply that by 27 months, and you've already saved $32,940.

The savings gets better if you consider that you won't have housing costs while you're gone. Let's suppose you own your home, that you can rent it out while you're gone, and that you can get $1,500 in rental income each month. Multiply this amount by 27 months, and you've saved an additional $40,500. And if you don't own your home but rent an apartment or house and your monthly rent is $1,500, you'll realize the same savings.

Now your total savings is more than $73,000. Add in the transition allowance for both you and your spouse, and you've saved more than $88,000 in a little over two years. And you might be able to save a lot more -- I've been conservative with my estimates of monthly expenses and housing costs.

I've written previously about the high costs of medical insurance if you retire before age 65 (the eligibility age for Medicare). If you're in your early sixties and are considering retirement, service in the Peace Corps can help you bridge the time until you reach age 65. If you are under age 65 and are covered by private insurance or insurance from your employer, you'll need to check the terms of your plan to see if you can suspend paying medical premiums and resume coverage when you return. If you are able to, your savings on medical premiums could be greater than the $220 amount in the example I described above.

Before you sign up, a few words of caution are in order. Performing your service can be hard work, requiring flexibility, patience, and determination. You'll also have to qualify for service, which includes passing a health exam. And if you're married and you've both decided to sign up, both of you will need to satisfy the qualification requirements. Still interested? Here's a link with more information about the terms and conditions of the Peace Corps' volunteer program.

Even if this particular idea doesn't work for you, now you've got a creative idea to discuss with your friends, family, and co-workers. Who knows? Maybe one of your friends will be interested. And the conversation may trigger other creative ideas you hadn't yet thought of. Given the substantial challenges that boomers face regarding retirement, we need all the creative ideas we can get! If you've got a good idea, please share it in the comment section below.

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