How To Retire Early With Kids: Your Guide To The Fastest Way

In this post, I reveal our family‘s story from pursing traditional F.I.R.E. to considering Semi FI so that we can enjoy real work-life balance for our family faster than thought is possible. I will do this by providing a guide in 3 simple steps that we, like most people, followed. But if you swap 2 steps in their order, you will immediately find the best and fastest way to achieve FIRE. The one that feels easy and attainable to YOU.

You see, the problem for some people who pursue FIRE, like us, is that we went straight down the traditional path. It’s been a bumpy road for us and quite a rollercoaster of emotions. Why? Because we simply didn’t know how a family can become financially independent in different ways.

In this post I want to give you an overview of the most common types of financial independence (and early retirement) including Semi FI paths (semi retirement) and the exact 3 steps to follow in the right order to find YOUR BEST WAY TO FIRE. In another blog post I have put together all available information about the Pros & Cons Of The 13 Types Of Financial Independence. If you want to learn more about how Semi-FI could look like for you definitely check out the Blog post FIRE vs Semi-Retirement: How To Semi-Retire In 5-10 Years.

Step 1: Realizing You Need A Financial Plan

Financial planning didn’t exist for most of my adult life. For me, planning my finances meant filling a small savings account, saving very (!) modestly for retirement, and paying off debt. That used to be my student loan, today it’s my home loan. But there was no real plan behind. I just did what everyone else was doing in Europe/Germany where I live. The first and last time I worked with a financial advisor was when I bought a house together with Marc.

I had no motivation to engage with my personal finances. Why should I change that? The money kept on coming in. I thought I don‘t need to worry about this money thing now. Especially not about retirement as it was decades away. Until one day when I started to worry a lot about money.

It was 2020 and the Corona crisis hit. Our first baby was just born. The economy drop scared me. Marc and I weren‘t sure if our companies will survive, even as big players in the market. What should we do if both of us get unemployed? We had no real emergency fund and a lot of debt. Marc and I wouldn‘t be able to maintain our lifestyle for more than 1 year if getting unemployed. And if we wouldn‘t find another job quickly, we would need to sell our house. How could that happen? We both had an income above-average and should be in a much better financial position. We felt powerless and almost trapped within our finances.

The first Aha-moment that painfully revealed: something is wrong with our personal finances. The second Aha-moment was even more important. It was the birth of our first daughter itself. We were so deeply impressed by this little human being and realized how precious family time really is. We developed the desire to be able to organize our time freely (and still work a lot, but with extremely flexible timing). We wanted to take a different path with our family. We wanted to have this time freedom as quickly as possible. But how?

Step 2: Saving More Money To Invest More Money (Actually Step 3)

I stumbled upon a video explaining the concept of F.I.R.E. and was all in. This was it! But I wasn‘t sure if the dream of early retirement can work out for us as we were already in our mid 30s. My husband Marc was even more skeptical. But as he is an IT guy he did run the numbers and quickly found the simple math behind early retirement. YES! We could achieve financial independence and become early retirees at around the age of 50. We then could enjoy 30-40 retirement years instead of only 10-20 years if we would retire at traditional retirement age of almost 70 years.

After figuring this out, Marc and I decided to immediately invest most of our savings from our bank account into our new brokerage account into specific Index Funds. We jumped right into our FIRE journey. If you want to learn more about the easiest way to invest into the stock market (even if you have no clue like me), you can read about The 7 Best SAFE Index Funds For Financial Independence.

It worked. We then became obsessed with saving more money to invest more money. It took us about a year to reach a savings rate of 60% of our income: 30% in the stock market, 30% in real estate (our own house, which we plan to rent out at some point). 4 years later we passed a 100K investment portfolio in the stock market. We‘re about to achieve our initial goal of early retirement in under 15 years. Done, right? Actually not. Here’s why.

Step 3: Finding YOUR Path To Financial Independence (Actually Step 2)

The problem is we realized on the go that we want to get the time freedom financial independence offers sooner. While our kids are still young. Instead of waiting another decade.

That would be possible. But only if making drastic life changes like geoarbitrage to move to a cheaper place for saving even more money to invest even more money and ultimately (semi) retire earlier. Or we have to make even more money (which requires even more hours of work per week). Or, in the best case, both. But none of this seemed desirable to us personally.

Also, we realized we actually don‘t want to become early retirees in the way that we stop working forever in the near future. We find deep fulfillment in work and want it to continue to be a part of our everyday lives — indeed, forever. We simply want to change the nature of our work and ease the stress of our work life by giving ourselves full time flexibility to work.

We struggled A LOT because we didn‘t know about alternative ways to achieve F.I.R.E. and we lacked asking the right questions BEFORE we started our F.I.R.E. journey like these:

• What feelings arise when you think about the discomfort you‘re facing today in your work life?
• What should F.I.R.E. change for your family’s life? WHY is it the answer and not just changing jobs?
• WHY does the idea of financial independence speak to you? What should that bring into your life?
• What role should work play in your retirement life?
• Do you want to get paid for the work you will continue doing?

I highly recommend you take the time to answer these questions honestly BEFORE you map out a financial plan for your future. You‘ll then quickly get clarity of your true life goals, retirement goals and find the retirement plan that is right for YOU for where you‘re at in your life right now.

So simply swap the order of step 2 and step 3 which will look like this:

• Step 1: Realizing You Need A Financial Plan
• Step 2: Finding YOUR Path To Financial Independence
• Step 3: Saving More Money To Invest More Money

The 7 Ways To Achieve Financial Independence: F.I.R.E. Or Semi-FI?

The 4 % Rule

Before we dive into the different types of FIRE and Semi FI we need to talk about the baseline: The 4 % rule. It is a withdrawal rate. 4 % is how much you can safely take out from your stock market portfolio in retirement (more in a second). That’s why it is also known as the 4 % safe withdrawal rate. That translates into having a specific amount of money saved up in your personal retirement account.

Why 4 % ? According to data, it is very likely that you will never run out of money in retirement if you use a 4 % withdrawal rate during your retirement years (if you have built a US portfolio and have a retirement horizon of up to 30 years). For 30+ retirement years (and a portfolio that is not only US based) you lower that 4 %. That means you need to have more than 25 times your annual living expenses in investments. FIRE folks typically like using a 3 % – 3,5 % withdrawal rate. Let’s run the numbers.

If you plan to have up to 30 years of retirement, you multiply your annual spending by 25 and use a 4 % safe withdrawal rate. If you plan to enjoy 30+ retirement years, you multiply your annual spending by 29 and use a 3,5 % withdrawal rate instead. So you need to have somewhere between 25 and 30 times your annual living expenses saved up in your personal retirement account.

For instance, let’s assume your annual spendings (you expect to have in retirement) are 30,000 (as you’re debt-free and healthcare is covered somehow). If we now multiply 30,000 by 25 our FIRE number would be 750,000. If withdrawing 4 % annually we could take out 30,000 per year for up to 30 retirement years. But, if we now multiply 30,000 by 29 our FIRE number would be 870,000. If withdrawing 3,5 % annually we could take out 30,000 per year for more than 30 years of retirement like 35-40 years more or less.

If you want to learn more about the 4 % rule, read one of the most famous blog posts in the FIRE community The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”.

Traditional F.I.R.E.

Achieving traditional F.I.R.E. is for you, if: You like to drink your home-made coffee, eat your home-cooked meal (and take both to work), spend most of your free time in nature and work long hours (to save and invest a lot of money). Your goal is to truly retire EARLY in your 30s, 40s or maybe 50s where working becomes fully optional.

This path will be easy for you if you are a frugal person by nature or are used to living frugally in everyday life, for whatever reason. For me personally, this was my daily reality a long time ago. But things changed and I slipped into (excessive) consumerism. You can read more About Us here. Also, I’ve written a few blog posts about my journey (beyond it) that you might find helpful if you find yourself in it:

• Creating Consumers: How We All Got Into Debt & Its Real Cost
• Impulse Buying: Its Roots & How To Overcome 3 Main Triggers
• How To Stop Impulse Buying And Save Money In 2 Simple Steps
• 7 Unique Money-Saving Challenges To Waste Less And Save More

Slow F.I.R.E.

Slow F.I.R.E. is special in every way as you don‘t necessarily have the goal to change something about your current work life. Your goal is to become financial independent later in life and fully retire at age 55 to 65+. You self-fund your retirement as you want to have a comfortable financial future once you retire through the passive income from your investments. Typically, your savings rate and investment rate is lower like 20 %. So, you can still have your latte or your avocado toast each day f.e. as that is what you value while retiring earlier than the average.

Fat F.I.R.E.

With Fat F.I.R.E. you aim to achieve financial independence AND retire EARLY on at least 1 to 2 Million Dollars or a multi million Dollar investment portfolio. So, typically you expect to have at least 100.000 in annual expenses after retiring early. You can only achieve Fat F.I.R.E. by investing a lot of money in a relatively short amount of time. That generally requires a high income and reducing your current costs of living as much as possible to invest as much as possible. You pare down for the moment in favor of investing.

Lean F.I.R.E.

Lean F.I.R.E. is quite the opposite. The goal is to only cover a frugal lifestyle through your passive income. You aim to achieve financial independence AND retire EARLY on an investment portfolio of „only“ 1 Million or less. Typically you already live off of around 30.000 to 40.000 per year which is around 2.500 to 3.300 per month. Some Lean FIRE folks work on the side after retiring early for the luxury they want to afford, if at all. Others use geo-arbitrage to relocate to a cheaper place with their Lean FIRE portfolio income.

Semi FI Type 1: Barista F.I.R.E.

With Barista FIRE you focus on saving and investing A LOT of your income early on up to a specific point in your portfolio‘s value. That is when you have invested enough money to already cover big part of your total expenses from your passive income. Typically around half. Now, you stop saving and investing AND start withdrawing money from your investment portfolio.

From now on your savings rate could be 0%. Typically, you then quit your 9-to-5 job and maybe a high-stress position and switch to a part-time job that is less demanding and stressful. That also helps with paying for your family’s health care. So, you save and invest more now to work less later in life.

If that’s sound interesting to you, you first want to calculate the exact retirement gap you expect to have. So, how much do you expect to still earn? To run your numbers, we offer a Retirement Gap Calculator for your convenience helping you to calculate the expected hole in your pocket so that you don‘t oversee something you might easily forget which happened to us. Here‘s a short insight into this Calculator:

If using a variable withdrawal rate you aim to always cover your early retirement gap and nothing more. In this case you can end up with a much bigger portfolio than if you would have used a fixed withdrawal rate which means to always withdraw that rate like 4 %.

If you would like to learn more about Barista FIRE or why I don’t actually consider Barista FIRE to be either FIRE or Semi FI, you can read the blog post Pros & Cons Of The 13 Types Of Financial Independence.

Semi-FI Type 2: Coast F.I.R.E. – THE FASTEST WAY TO RETIRE EARLY

Coast FIRE is Semi-FI at it‘s core. You aggressively save and invest A LOT of your income early on up to a specific point in your portfolio‘s value. That is when you have invested enough money to achieve financial independence by the time you reach traditional retirement age (like at age 65, 67 or later according to the 4 % rule presented above).

Now, you can stop saving and investing into your investment portfolio but don‘t start withdrawing money yet. In the back your money grows into your F.I.R.E. number if it just stays in the market. That is the power of compound interest. We translated that mathematical process into an easy to use calculator:

Meanwhile, you can afford to earn less as you don‘t need to save and invest anymore. So, from now on your savings rate could be 0% as it is with Barista (F.I.R.E.). If you had a high savings rate and investment rate of at least 30-40 % you could work less hours to pursue a side hustle. As most FIRE folks have a high savings rate of 50 % and more, they only live off of 50 % of their income anyway. That allows them to really retire early from the (work) life they live now and switch jobs or even careers. That’s the power of having a high savings rate.

With Coast F.I.R.E. you make sure to self-fund your retirement account early on and to properly run your numbers so that you create a real financial plan for your money. If you’s like to learn more about Coast FIRE and why it is by far the fastest way to retire early with kids in the sense that you can create the (work) life you want early on, read the full blog post Pros & Cons Of The 13 Types Of Financial Independence.

Semi-FI Type 3: Combos And Variations Of Coast & Barista

There are many different combos of Coast FIRE and Barista FIRE that combines both approaches in different ways. Also, there are certain variations of one of those Semi FI paths that some FIRE folks came up with followed by other. The most prominent one may be Flamingo FIRE. You can read about all those different combos and variations in the blog post Pros & Cons Of The 13 Types Of Financial Independence.

Our Family’s Plan To Achieve F.I.R.E.

Initially, Marc and I planned to achieve traditional F.I.R.E. at about the age of 50. We then planned to have a passive income of around 2.700 Euro including 200 in addition for tax payments on that income. Also, we wanted to be debt-free. So, we wanted to build up a stock market portfolio worth over 800.000 Euro while (at the same time) fully paying off our mortgage on the house we bought. Those 800K would include a buffer for additional expenses in F.I.R.E. such as tax payments as mentioned. More in a second.

As we are already in our mid 30s, we have less than 15 years to achieve that. So, we need to save and invest around 2.100 Euro per month on average into the stock market while also paying back the same amount on our mortgage more or less. For our income situation that translates into saving and investing around 30 % of our income into the stock market while also saving 30-35 % towards our mortgage. To achieve that we experiment with a more simplified and frugal life as a family that feels really good to us.

Today, we happily live off of only around 35 % of our family‘s income. That might sound crazy, but we truly do. But, I get it because I initially resisted the idea of living a frugal life with my kids. Why? Well, because I thought I will limit my kids, if I do not offer them „enough“. Does that sound familiar to you? I bet it does for some of you. But, how wrong I was. I talk more about that in the blog post The Ultimate Budget For FIRE: A Frugal Values-Based Budget.

Let’s talk about our F.I.R.E. number. It was a bit over 800.000 Euro. That was the result of the 4 % rule discussed above. We multiplied our 2.500 monthly expenses by 12 which represented our early expenses of 30.000 and then by 25 which resulted in our F.I.R.E. number being 750.000. But as we need to pay taxes on our withdrawals we need a portfolio worth a bit over 800.000 and a passive income of around 2.700 per month (so that we can pay taxes on withdrawals too). Now, we would be able to take out 4 % from our portfolio (= withdrawal rate), pay our taxes and safely retire early for 30 years.

But things have changed for our family. Not only are our monthly expenses higher than expected. Also, our desire to continue working is stronger than we thought it would be. We are so passionate about the kind of work we do now on this blog and beyond that I happily wake up every day to continue blogging and helping other families and everyone else out there seeking for help. We want to continue doing that. So, we don’t mind if our first year of retirement will be in our 60s instead of our 50s if we can continue doing that kind of work. Now, we‘ll see how it turns out.

Further Resources

I love a good read in the evening especially about the FIRE movement. Marc always jokes about my love of reading financial books when he tells me about the latest crime book he’s reading next to me in bed. However, if you order one of the books below using the link provided you support us in doing what we love helping other .

Vicki Robin is seen as one of the founders of the F.I.R.E. movement. I can highly recommend her book „Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence“. The book quickly became a New York Times and international bestseller featured in the “The Oprah Winfrey Show” and many others.

Now, there is another book that saved my personal finance journey and is one of my TOP 5 must-read books ever: „The Simple Path to Wealth: Your road map to financial independence and a rich, free life“. The author J L Collins shares his insights of the investment world and explains how to create a fortune in such a pleasant way that I have read the book in a couple of days. The core idea: investing your money into the stock market will make everyone richer than before, if doing it right and automate it.

A great further resource for everyones F.I.R.E. journey that I enjoy reading and watching is the blog Our Rich Journey with their own YouTube Channel focusing on retire EARLY and MoneyFlamingo who is all about Semi FI. Another more unique resource is „FinancialResidency“ exclusively dedicated to „Financial planning for doctors with goals“ in the US. If you’re from Europe like us you may want to check out the YouTube Channel from Angelo Colombo. But this is just a brief excerpt.

When you walk away today with at least one new idea to improve your personal financial journey towards F.I.R.E. I’d love to show you some more in the next post. If you haven’t already, you can apply to become a part of the community to not miss any new release. For that you can subscribe to our newsletter below in the green footer.

As we regularly try to cover topics requested by a large part of the community, I’d love to hear: Which one of the 7 ways to achieve F.I.R.E. including Semi-FI sounds best to you? Let me know in the comments below!