By Kevin Carley
Here is a crazy, but surprisingly sound financial planning idea: spend the first three years of your retirement as a Peace Corps volunteer. Serve your country, assist the people of a developing country and improve your financial position by $100,000 or more.
How It Works
Most retirement planning strategies focus on how you can save more for retirement. You are saving that money to cover your living expenses during your retirement years. What if instead you could bring your living expenses to zero during the first three years of "retirement"? Not spending $100,000 in those first three years of retirement has the same impact as saving an additional $100,000. And we all know that saving an additional $100,000 is very hard to do.
Let's say you have savings, or a pension, that will generate $35,000 in income per year, in addition to your Social Security income to support your retirement lifestyle. You and your spouse are healthy 63-year-olds and you are ready to leave your jobs, but you are not sure that you have quite enough socked away. You would feel a lot better about things if only you had an extra $100,000 in savings.
Instead of waiting until you have saved that amount of money, what if you put yourself in a situation where you did not need to spend that $100,000? What if you could arrange your affairs so that your spending needs for your first three years of retirement were zero? How can you do that?
Become a Peace Corps volunteer.
Why You Should Join
Let me be clear. You should not join the Peace Corps for financial reasons. You should join the Peace Corps if you want to serve your country and the people of a developing nation. As their tag line says, "It's the toughest job you will ever love." But if these goals appeal to you, and you are reasonably healthy and have some useful job skills, they would love to have you.
As a Peace Corps Volunteer, you get free housing and comprehensive free medical insurance. You get a stipend that covers living expenses at the local level in your host country. You can serve with your spouse. It is a two-year commitment, but if you have been a high performing volunteer you will be eligible to extend for a third year. You can live modestly by local standards without spending a penny of your own money.
Zero Expenses Increases Your Income
On the home front, you have sold your car (no car insurance, payment, taxes or maintenance costs), you have rented out your house with utilities not included, (covers your mortgage if you have one) and you have no oil bill. The rental income from your house can cover the cost of storing your furniture and your property taxes. You have no bills. Your expenses are zero. That $35,000 per year you were going to spend to support your retirement stays in your account. Over the course of three years this grows to another $105,000 in savings. You also have deferred taking your social security for three years. When you start receiving social security payments, the value of that check increases by about 15 percent for the rest of your life.
Plus you will have contributed to the Peace Corps mission that John F. Kennedy defined in 1961 to promote world peace and friendship. That mission seems even more important in the world we live in today. And you will have lots of stories to share with your grandchildren (whom will have shifted from thinking you are slightly boring to thinking you are really cool). Last, but not least, you will have had one of the peak experiences of your life.