A Unique Guide How To Retire Early With Kids The Fastest Way

You want to retire early with kids the fastest way possible? But you struggle with the traditional path to F.I.R.E. Financial Independence Retire Early? Then you are were we have been before exploring alternative ways to achieve financial independence.

In fact, there are 7 proven ways to achieve financial independence. But not every way focuses on achieving EARLY retirement too. These ways can be classified as semi-retirement or Semi-FI, short for Semi Financial Independence. The goal is to retire early from your current (work) life to a more self-directed and balanced lifestyle where you still work for an income but on your terms. You continue doing so for 5 to 10 years or more until your portfolio has grown to your F.I.R.E. number. Now, you get the same financial freedom and that greater sense of financial security that traditional F.I.R.E. offers.

Here’s the best way to figure out if such an alternative retirement planning is right for YOU and your family: go through a simple 7-step process on how to achieve F.I.R.E. with kids first. Because only then you will quickly map out how your journey to EARLY retirement would look like. That 7-step process starts with some hard questions that can be truly life-changing. However, if you then want to calculate how Semi-FI would look like for you definitely check out our Blog post to come on FIRE vs Semi-Retirement: How To Semi-Retire In 5-10 Years.

In this post I will reveal our family‘s story from pursing traditional F.I.R.E. to considering Semi-FI so that we can enjoy that work-life balance for our family faster than thought is possible by exploring:

1. The 7-step process to achieve F.I.R.E.
2. The 7 ways to achieve F.I.R.E. including Semi-FI

How We‘ve Got There

Pursuing F.I.R.E. took us a long time as financial planning didn’t exist for most of our adult life. The first and last time we worked with a financial advisor was when we bought our house. We had no motivation to engage with our personal finances. Why should we change that? The money kept on coming in. We thought we don‘t need to worry about this money thing now. Especially not about retirement as it was decades away. Until one day when we started to worry a lot about money.

My husband Marc and I made some bad investment decisions before we bought our own house using a mortgage we could afford. To us planning our finances was paying down our mortgage, feeding a small savings account and modestly saving for retirement. But there was no real plan behind. We just did what everyone else was doing in Europe/Germany where we live.

There were 2 decisive moments in our life that made us becoming serious about planning our personal finances together as a couple.

It was 2020 and the Corona crisis hit. Our little baby girl was just born. The economy drop scared us. We 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 a good 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 that desire of raising our child by ourselves equally and felt the urge to go another path with our family. But how?

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.

Making Our Dream Of Early Retirement A Reality

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 then became obsessed with saving more money to invest more money. It worked. We needed around 1 year to start saving and investing 60 % of our income: 30 % into the stock market, 30 % into real estate being our own house. 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.

The problem is we want to get the time freedom financial independence offers sooner while our kids are still young instead of waiting another decade. 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 just want to change the kind of work we‘re doing and take the stress out of our working lives from our full-time career now. But our goal is still to achieve financial independence one day and to self-fund our retirement.

We struggled 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. This is what we learned.

The 7-Step Process To Achieve F.I.R.E.

Before you start to map out your own F.I.R.E. journey using the following 7-step process you first need to ask yourself how you want your life to look like before retirement and during retirement. Be honest with yourself. If you‘re not, you might trick yourself into a retirement plan that is not right for YOU. That happened to us. After we asked ourselves some hard questions we quickly pictured how we want our life to look now and in the future. Some of these questions are:

• 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?

Take your time and answer that in quite. You‘ll then quickly get clarity of your true retirement goals and find the retirement plan that is right for YOU for where you‘re at in your life right now which might be Semi-FI. We come to the different F.I.R.E. plans including Semi-FI in a second. Ultimately your answers will allow you to map out your own F.I.R.E. journey how it feels right to you using the 7-step process:

1. Figure out what you earn and spend, on average.
2. Analyze your expenses for your NEEDs, WANTs, INVEST to become financially aware.
3. Boost your savings and investment rate & create a realistic budget.
4. Figure out your net worth & decide for an asset allocation.
5. Set up a stock market investing plan.
6. Grow your stock portfolio with 3 indicators: your return rate, your portfolio value and compound interest.
7. Plan exactly how to live off of your portfolio.

A little spoiler: We just have put this 7-step process and much more into a Workbook for F.I.R.E. to be published on our Blog. So stay tuned. It is a practical step-by-step guide on how a European family like us (and everyone else) can achieve financial independence and make the early retirement dream a reality – however that might look like for you.

The 7 Ways To Achieve F.I.R.E. Including Semi-FI

Traditional F.I.R.E.

If you like drinking your home-made coffee, eating your home-cooked meal, mostly being in nature in your free time and working a lot to invest a lot then traditional F.I.R.E. might be right for you. Your goal is to truly retire EARLY in your 30s, 40s or maybe 50s where working becomes fully optional as you become financial independent long before traditional retirement age. This path is a lot of hard work in the beginning, especially if you’ve never been a saver and struggle with (excessive) consumerism.

Achieving traditional F.I.R.E. means you need to have 25 times your yearly living expenses in your investment portfolio to then withdraw (aka take money out from our portfolio) 4 % in retirement from it. According to data that applies to US portfolio set-ups and to retirement periods for up to 30 years. For 30+ retirement years you lower that 4 %. Of course you need a higher portfolio value for lower withdrawal rates if you want to withdraw the same amount.

Fat F.I.R.E. & Lean 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. 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.

Slow F.I.R.E. & Barista (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.

Barista (F.I.R.E.) is also very special as you neither have the goal to achieve early retirement nor financial independence. That‘s why I put the term F.I.R.E. in brackets above.

Many don‘t know or realize that Barista (F.I.R.E.) might be a concept forever. That means it can be that your portfolio will never grow into your F.I.R.E. number so that you will never be financial independent technically – at least not only from your investment portfolio. You will need to rely on a state pension in addition or social security benefits or on a part-time job basically forever.

But it can also be that your investment portfolio will do really well growing in the back into your F.I.R.E. number. In this case Barista F.I.R.E. deserves its naming as it will be something you just do for a limited period of time. Typically, you then can still truly retire earlier like in your 50s or at 60 years. But the point is that it depends.

However, with Barista F.I.R.E. 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. 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 you want to calculate your exact retirement gap 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 %.

Semi-FI: Coast F.I.R.E. & Barista-Coast F.I.R.E.

Coast F.I.R.E.

Coast F.I.R.E. 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. Now, you stop saving and investing into your investment portfolio but don‘t start withdrawing money yet. With Coast F.I.R.E. you make sure to self-fund your retirement account early on.

In the back your money grows into your F.I.R.E. number if it just stays in the market. Meanwhile, you can afford to earn less as you don‘t need to save and invest anymore. 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. Or you could maybe even consider becoming a one income family. From now on your savings rate could be 0% as it is with Barista (F.I.R.E.).

There are different versions of Coast F.I.R.E. like Flamingo F.I.R.E. where you aim to have 50 % of your F.I.R.E. number in retirement savings before you stop investing your money into your investment portfolio. That reduces your semi-retirement to 10 years or less so that you will reach traditional F.I.R.E. earlier. But you will reach Semi-FI later. With Flamingo F.I.R.E. you want to (have the option to) become financially independent much earlier and eventually retire early.

Barista-Coast F.I.R.E.

Barista-Coast F.I.R.E. is a combo of 2 F.I.R.E. ways. Here you split your portfolio into 2: your Coast F.I.R.E. portfolio and your Barista portfolio. First, you need to figure out your Coast F.I.R.E. number. Than you subtract this amount from your current portfolio. Now, you need to leave your Coast F.I.R.E. portfolio untouched until traditional retirement so that it can compound into your F.I.R.E. number. Your Barista portfolio is the rest what‘s remaining.

You can start withdrawing money from that portfolio to supplement your income. Therefore, you can use the 4% rule but actually you can withdraw more as you don‘t need that portfolio to survive forever. You just need it to survive during your semi-retirement years which can be only 10 years. But during that time you will continue working for an income to pay for the rest of your living expenses that your passive income doesn‘t cover. As your savings rate could be 0% you can choose that kind of work you‘re passionate about.

Our Plan To Achieve F.I.R.E. In 15 Years

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 need to build up a stock market portfolio worth over 800.000 Euro while 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. As we are already in our mid 30s, we have less than 15 years to achieve that. So, we need to invest around 2.100 Euro each month into the stock market at least while also paying back at least the same amount on our mortgage.

For our income situation that translates into saving and investing around 30 % of our total income into the stock market. Our investment strategy is simple: we just consistently buy specific low-cost ETFs with an annual return on average of around 10 % 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.

Our F.I.R.E. number

Our F.I.R.E. number is a bit over 800.000 Euro. That is the result of the prominent 4 % rule or 25 times rule. We multiply our 2.500 monthly expenses by 12 which represents our early expenses of 30.000 and now by 25 which results 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.

Now, we can take out 4 % from our portfolio (= withdrawal rate), pay our taxes and safely retire early for 30 years. If we plan our retirement horizon to be longer the recommendation is to lower the withdrawal rate to 3 % up to 3.7 %. As we know the state pension we would get in traditional retirement that would then allow us to lower our withdrawal rate.

But things have changed for our family as mentioned in this post before. Not only are our monthly expenses higher than expected even if we plan to reduce those again at some point. 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 help other European families and everyone else out there seeking for help.

We want to continue doing that instead of „only“ working full-time in our corporate jobs as we have done it before we had kids. We don‘t mind if that pushes away our retirement date and 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, these are just 2 retirement plans we have run so far and feel good about. We‘ll see how it turns out.

Further Resources

What helped me the most within this transition, was looking at others who had done this before. Inspiring role models like Vicki Robin who 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“. If you order the book or other Amazon items using this link you support us in what we love to do. 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.

A great further resource for your 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. I also liked Women Who Money being a great resource if you just start learning that „Nothing Happens Without a Plan“ and „How To Do Financial Planning“. Another more unique resource is „FinancialResidency“ exclusively dedicated to „Financial planning for doctors with goals“ in the US. 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!