How To Retire Early With Kids: A 5-Step Guide To The Easy Way

We’ve been on our FIRE journey for 5+ years now and can say: To Retire early with kids is doable. Especially if you choose the easy way to financial independence that’s becoming increasingly popular among the FIRE (Financial Independence, Retire Early) community and there’s a reason for that. It’s also the fastest way to an early-retired lifestyle. Still, many people don’t know about it (like we did). Unfortunately. I want to change that with this post.

I will reveal our family‘s story from seeking to retire EARLY with kids to struggling and considering semi retirement. Today, we’re about to semi retire early with kids and enjoy real work-life balance (or rather work-kids balance) faster than thought possible. It’s been a bumpy road and quite a rollercoaster of emotions for us that I will share very honestly so you can avoid the same pitfalls we’ve been through.

This post provides a guide in 5 simple steps on how to retire early with kids that we, like most people, followed. Unfortunately. Because if you swap 2 steps in their order, you’ll achieve financial independence and early retirement in a way that feels easy and attainable to you – without that rollercoaster. Let’s start.

You Need A Strategic Financial Plan To Retire Early With Kids (Step 1)

From Financial Mess To Money Boss

Financial planning didn’t exist for most of my adult life. I just did what everyone else was doing: feeding a small savings account, a retirement account and paying off debt (student loans). But there was no plan behind. Then came the Corona crisis in 2020. Our first baby was just born and we bought a house (taking on debt). The economy dropped. If Marc and I would get unemployed and wouldn‘t find a new job, we would need to sell our house. How could that happen? We both had an income above-average, tracked our expenses and budgeted our money.

But apparently for the wrong things. That painfully revealed: something is wrong with our personal finances. We felt trapped and realized we need to change how we approach managing our finances. At the same time we were so overwhelmed by the birth of our first daughter and deeply impressed by this little human being. We developed the desire to have more quality time as a family and being able to organize our time freely (still working a lot, but with extremely flexible timing). But how?

I stumbled upon a video explaining the concept of FIRE. In a nutshell: you focus on investing your money with the goal of one day generating enough passive income from your investments that you can live off of those. This was it! But could the dream of early retirement work out for us (as we were already in our mid 30s)? Can we develop a strategic financial plan for FIRE? And stick to it? 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 retire early with kids. How? Simply by strategic financial planning: saving effectively through intenational frugal living, budgeting our money, and investing for passive income. We then could enjoy decades of retirement instead of only 10+ years (if we would retire at traditional retirement age of almost 70 years). We committed to succeed at achieving FIRE.

Resources To Create Your Strategic Financial Plan For FIRE

We struggled a lot at the beginning of our FIRE journey as we lacked having the right resources on hand. Despite tracking our expenses and budgeting our money for years, using online tools like Ynab, we had no clue how to create a financial plan for FIRE. How much do we need to save for investing? How big should our investment portfolio be so that it generates enough passive income that we can live on it? And how exactly would our investment portfolio grow? To just name a few questions we had in mind.

As we couldn’t find the right resources to make a strategic financial plan for FIRE, we created our owns. We never intended to share those with others like you. But today, you can find the first ones in our Freebies Library (to get you started) like our Investment Growth Calculator or you can browse our Shop (to create a solid financial plan for retiring early with kids) using our Passive Income Calculator or Retirement Gap Calculator and some more.

If you’re new to tracking your expenses and budgeting your money, I like to motivate you: It’s easier than you may think. There are a ton of free resources to help you out like The Budget Mom I can personally recommend as well as:

1. Ynab, an online app to track and review what you spend (like we do for > 10 years) or the following:
2. Our Pick Of Best Free Budgeting Apps For 2025 and The Best Budget Apps for 2025.
3. You can also browse our Freebies Library and get your copy of our FREE budgeting template.

But where and how do you start to create a strategic financial plan for FIRE?

Calculate Your FIRE Number with Kids in Mind (Step 2)

Your FIRE number is the amount of money you need to have saved up in your investment portfolio so that the passive income it generates can pay for your bills. Then you reached your FIRE date and can retire early with kids. But, retiring early with kids takes more financial planning. You need to calculate with kids in mind and forecast your future expenses that can be hard to predict. More on that down below. But first, we need to talk about the baseline of every strategic (early) retirement plan: The 4 % rule and your FIRE number.

The 4 % Rule (Behind Your FIRE Number)

The 4 % rule is a withdrawal rate. 4 % is how much you can safely take out (aka withdraw) from your stock market portfolio in retirement. That’s why it is also known as the 4 % withdrawal rate.

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 (for a US portfolio and 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 % to 3 %-3,5 % or even less.

The withdrawal rate translates into having a certain amount of money saved up in your investment portfolio. For example, when you decide for 4 % you need to have around 25 times your annual living expenses in investments and retirement savings. No clue why or what that means? Let’s run the numbers.

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

Your FIRE Number

If you plan to have up to 30 years of retirement, you want your investments to pay for your living expenses for 30 years. If so, multiply your annual spending by 25. That’s your FIRE number if using 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 and investment portfolio. Let’s look at an example.

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 your FIRE number would be 750,000. If withdrawing 4 % annually you could take out 30,000 per year for up to 30 retirement years. But, if we now multiply 30,000 by 29 your FIRE number would be 870,000. If withdrawing 3,5 % annually you could take out 30,000 per year for more than 30 years of retirement like 35-40 years.

Accounting For Rising Costs As Kids Get Older

I say it upfront: Even if you’re living a frugal lifestyle as a family, like we happily do, you will experience rising costs as kids get older. We can tell this from experience after raising 2 (soon to be 3) kids. You see, if you’re saying your kids’ expenses will stay the same in the future you may struggle as I did. I thought I will limit my kids, if I don’t offer them „enough“ (because there’s no budget). 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 How I Spend My Money On What Matters Most & Skip The Rest.

However, even then you will have rising costs as kids get older. There are some child-related expenses that are difficult to predict but that you need to consider when planning to retire early with kids.

Examples are rising childcare costs (ours doubled in 2 years due to inflation), new hobbies as children get older (even if yours only have 1 hobby) or unexpected school trips or medical costs. What we personally didn’t factor in was school year planning and flexibility. Don’t let your budget limit your school choice. For example, we recently decided to send our first daughter to a private school because she’s doing so well in the attached preschool (Montessori). But, we didn’t account for that in our FIRE number.

How can you account for increasing kids-related expenses if planning to retire early with kids?

Add a buffer or round up your FIRE number generously. For example, calculate as if you have €200–500 more monthly expenses. Or, if your FIRE number is €770,000 for example, round it up to €850,000. This equates to a buffer of approximately €333 per month (according to the 4 % rule). We regret that we didn’t do that.

About A 50 % Savings Rate To Retire Early With Kids (Step 3)

Once you know your FIRE number and developed a financial plan for how to retire early with kids, you need to make those savings and investments happen. Marc and I became obsessed with saving more money to invest more money. It took us about a year to reach a 50 % savings rate. Shortly after we saved 60 % of our income: 30 % in the stock market, 30 % in real estate (our house, which we plan to rent out at some point). And we are not super high earners, but a normal (soon to be five-member) middle-class family.

Now, one could argue that it is difficult to maintain such a high savings rate when children get older or one partner goes on parental leave or works part-time (which is the rule rather than the exception in Germany). And while I can say firsthand that there were months when our savings rate fell below 50 % and we didn’t invest any money, this was a conscious decision (due to my long parental leave). Apart from this period, our savings rate has never fallen below 50%. And even though I’ll be going on parental leave again (for a short time) soon, we want to maintain this level.

You see, saving more comes easy to some of us who are used to living frugally. But, everyone can learn it and will profit from intentional money choices. How about you? Are you a frugal person by nature for whatever reason? For me personally, this was my daily reality a long time ago. But things have 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 to frugal living (and beyond it) that you might find helpful:

• 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

Investing Aggressively But Safely (Step 4)

Once you start saving more money, where do you invest? Actually, it matters more that you just start investing (more) money. Start investing early on — time matters more than the amount invested, especially when you just start. You know the saying “Time in the market always beats trying to time the market“? That is very true and we’ve wrote about that in the blog post How Should I Invest To Achieve Financial Freedom?.

However, after Marc and I decided for FIRE, we jumped right into investing into the stock market and transferred most of our savings from our bank account into our new brokerage account into specific low-cost ETFs / Index Funds. 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 The 7 Best SAFE Index Funds For Financial Independence.

As we reached our goal of a 50 % savings rate (and more), we automated our monthly investments. We commited to an investment rate of thousands each and every month. Today, over 5 years later we grew our stock market portfolio to almost 150,000 and we keep on growing it. Done, right? Actually not. Here’s why. We did not question if traditional FIRE is the right path for our family.

Define What Early Retirement Means To You (Step 5 – Actually Step 1)

The problem was, we realized on the go that we want to get the time freedom financial independence offers much sooner. While our kids are still young. Instead of waiting another decade. That would be possible 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 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 (for a decent income). 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 by giving ourselves full time flexibility to work.

We struggled A LOT because we didn’t figure out what “early retirement” actually means for our family or how we want our daily family life to look like once we retire early with kids.

That Step 5 should have been our Step 1: What does early retirement means to you?

• Traditional FIRE (never work again)?
• Semi-Retirement through Barista FIRE (part-time work and earning passive income)?
• Semi-Retirement through Coast FIRE (let investments grow and only work to cover current costs)?

When planning to retire early with kids, it can be often more realistic and way easier to achieve semi retirement. That is no longer a secret and a rising trend among the FIRE community. But still, many don’t know about it. If you want to learn more about semi retirement or how Semi FIRE could look like for your family, definitely check out the following Blog posts:

• Pros & Cons Of The 13 Types Of Financial Independence
• What Is Semi Retirement? (Escape In Your 40s And 50s)
• How Semi Retirement Works vs Early Retirement + 13 Best Resources
• Semi Retirement: The Secret How To Semi Retire In 5-10 Years
• FREE Semi Retirement Calculator & The 3 Main Semi FIRE Types

The Questions To Ask BEFORE You Decide To Retire Early With Kids

I highly recommend you take the time to answer the following questions honestly BEFORE you decide how to retire early with kids. You‘ll then quickly get clarity of your true life goals, retirement goals and find the retirement plan that is right for your for where you‘re at in your life right now.

1. What feelings arise when you think about the discomfort you‘re facing today in your work life?
2. Why is FIRE the answer and not just changing jobs?
3. Why does the idea of financial independence speak to you? What should that bring into your life?
4. What role should work play in your retirement life?
5. Do you want to get paid for the work you will continue doing?

Further Resources About How To Retire Early (With Kids)

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. Her book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence takes a radically new view on “your hourly wage”. As she wrote, when you stop working for an income, you may be out of a 9-to-5 job but you will never be out of work. 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.

Meet the Frugalwoods: Achieving Financial Independence Through Simple Living is a very personal story about a couple from the US (today a family of 4) who ditched a normal lifestyle and started simple living. The share first hand what it means to retire early with kids and how that can look like. This is one of my favorite FIRE books as it’s amazingly written so that it’s truly a pleasure to read.

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. Both offer resources like Calculators, Workbooks or even Courses on how to retire early with kids. 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 or TheGoodLifeJourney from David. 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: What is your experience with seeking traditional FIRE and early retirement? Let me know in the comments below!