Navigating Early Retirement: What Every Young Family Needs to Know

My journey to early retirement began unexpectedly when I stumbled upon the book “Your Money or Your Life.” It was a lightbulb moment that set the wheels in motion. Soon after, I discovered Mr. Money Mustache‘s blog. Seeing someone living the dream of early retirement and how he and his wife went from zero to hero was beyond inspiring.

I crunched some numbers and approached Tatiana with a proposition: “How about retiring in less than a decade instead of working until 65?” Her enthusiastic “Sign me up!” was all we needed. We were embarking on a path our friends couldn’t even fathom. We did our calculations, committed to the plan, and the rest, as they say, is history.

Early retirement isn’t just for empty nesters or childless couples anymore. More and more young families are exploring the possibility of financial independence and retiring early (FIRE). But planning for early retirement with children comes with its own unique set of challenges and considerations. Let’s dive into what every young family needs to know about navigating the path to early retirement.

1. Figure Out Your “Why”

Before embarking on the early retirement journey, it’s crucial to understand your motivations as a family:

• Are you seeking more quality time with your children?
• Do you want the freedom to travel or worldschool your kids?
• Are you looking to pursue passion projects or start a family business?

Understanding your “why” will help shape your financial goals and lifestyle choices.

For us, the allure of unlimited travel time was irresistible. We knew we wanted children, but homeschooling wasn’t initially part of the plan. It wasn’t until after we retired in 2020 that we wholeheartedly embraced homeschooling. Our “why” evolved, but the core remained constant: to own our time. The beauty of early retirement is that we can shift our focus as our family’s needs and interests change.

2. Crunch Those Numbers

Your Financial Independence (FI) number—the amount you need to retire comfortably—will likely be higher with children in the picture. Consider:

• Education costs (private school, college savings)
• Healthcare for the whole family
• Activities and extracurriculars for kids
• Potential for supporting adult children in the future

A good rule of thumb is to multiply your estimated annual expenses by 25-33, depending on your risk tolerance.

Calculating our FI number with children in mind was challenging, especially since we didn’t have kids when we started our journey. We devoured blogs of early retirees with families to get a realistic picture. When our daughter Yuna arrived just before retirement, we were in for a surprise: while we had a new “child” category in our budget, our spending on travel and entertainment decreased. It was a financial balancing act we hadn’t anticipated.

Healthcare costs were particularly tricky to estimate, so we erred on the side of caution with generous ballpark figures.

3. Save Like You Mean It

With children, you’ll need to balance aggressive saving with providing for your family’s needs:

• Maximize tax-advantaged accounts (401(k)s, IRAs, 529 plans for education)
• Consider a high-yield savings account for your emergency fund
• Look into health savings accounts (HSAs) for triple tax advantages

Our winning strategy was maxing out our 401(k)s. This not only lowered our tax burden but also allowed a significant portion of our wealth to continue growing in the market. We’ve withdrawn less from these accounts than anticipated, providing an extra cushion in our early retirement years.

One regret? Not fully understanding and utilizing HSAs earlier in our journey. It’s a lesson we’re eager to share with others to help them avoid the same oversight.

4. Rethink Where You Live

Housing is often a family’s largest expense. Consider:

• House hacking (renting out part of your home)
• Moving to a more affordable area
• Downsizing to reduce costs and maintenance

Our housing strategy evolved with our early retirement plans. Initially, we rented to maintain flexibility, even though we owned a rental property elsewhere. Post-retirement, we set our sights on Florida. We’d factored a home purchase into our FI number, intending to buy outright. However, with interest rates at historic lows, we opted for a mortgage on half the amount, keeping cash liquid for our early retirement years. This decision has given us both a home base and financial flexibility.

5. Live Frugally (But Make It Fun)

Teach your children the value of money and frugality:

• Cook meals at home and pack lunches
• Shop secondhand for clothes and toys
• Embrace free family activities in your community

Our family’s frugal living doesn’t feel like deprivation—it’s an adventure. Tatiana and the kids are playground connoisseurs, visiting local parks at least three times a week. It’s free entertainment, exercise, and socialization rolled into one.

Our at-home karaoke sessions have become a family tradition and a hit with friends. It’s more than just fun—our kids are improving their reading skills, and we’re all stepping out of our comfort zones. Who knew frugal entertainment could be so rewarding?

6. Get Creative with School

Early retirement might mean unconventional education choices:

• Homeschooling or worldschooling
• Public school in a high-performing district
• Part-time private or alternative schooling

Research options that align with your family values and retirement goals.

Our dive into homeschooling has been both challenging and rewarding. We’ve embraced an interest-based learning approach, which means our schedule is fluid. Our daughter, equivalent to a first-grader, might immerse herself in a topic for a few weeks or dedicate half a year to perfecting a dance recital.

I’m about to embark on teaching Yuna Music Theory and Piano by Ear. I’ve designed a curriculum that balances technical skills with the joy of playing favorite songs by ear. It’s basically our way of making learning fun while still teaching the important stuff. It fits right in with our “go with the flow” approach to homeschooling.

7. Multiple Income Streams Are Your Friend

Diversify your income to provide more security for your family:

• Rental properties
• Dividend-paying investments
• Side hustles that can involve the whole family

Rental properties have been our financial cornerstone, complemented by a portfolio of ETFs like VTSAX (Vanguard Total Stock Market Index Fund) and VPMAX (Vanguard PRIMECAP Admiral Shares). We’re also nurturing a budding idea for children’s books, potentially featuring our kids as characters. It’s still in the dream stage, but the entrepreneurial spark is there, waiting to be kindled.

8. Don’t Become Hermits

Early retirement can be isolating, especially for children:

• Plan for social interactions through community groups, sports teams, or homeschool co-ops
• Budget for family memberships to museums or activity centers
• Consider how you’ll maintain relationships with other families who may still be working

Contrary to concerns about isolation, our social life in early retirement is thriving. Homeschooling co-ops have been a goldmine for connections. Our children are social butterflies, equally at ease in structured activities and free play.

We’ve mastered the art of balancing our flexible schedule with our working friends’ routines, meeting up on evenings and weekends. And we’ve become accidental social connectors—our lanai, affectionately dubbed “The Playground,” has become a hub for new friendships, music, and potluck dinners.

9. Teach Kids About Money

Use your early retirement journey as an opportunity to educate your children about money:

• Involve kids in budgeting discussions
• Teach them about investing with a small portfolio
• Encourage entrepreneurship through small business ventures

While our kids are too young for complex financial discussions, we’re laying the groundwork for money-smart habits. It’s exciting to imagine how our early retirement lifestyle will shape their understanding of work, money, and life satisfaction as they grow.

10. Stay Flexible

Remember that early retirement with a young family requires adaptability:

• Be prepared to return to work if necessary
• Regularly reassess your financial plan as your family’s needs change
• Stay open to new opportunities that align with your family’s goals

11. Figure Out the Healthcare Situation

Healthcare is a significant concern for early retirees, especially those with children:

• Research health share ministries as an alternative to traditional insurance
• Consider part-time work to maintain health benefits
• Budget for out-of-pocket medical expenses

Our approach to healthcare in early retirement has been cautious. We maintain a plan through the health exchange for emergencies, supplemented by out-of-pocket spending on holistic treatments and check-ups. While health share ministries are popular in the FIRE community, we’ve opted for the security of traditional insurance despite the higher cost. After five years, we’ve gained a realistic picture of our healthcare spending, allowing for more accurate budgeting.

12. Come Up With a Family Game Plan

Develop a shared vision for your family’s early retirement:

• What values are most important to your family?
• How will early retirement help you live out these values?
• How will each family member contribute to the early retirement goal?

Writing this article has inspired me to formalize our family’s game plan. Since our youngest, Lina, is already two, Tatiana and I might have more time to articulate our vision for this next chapter. As we catch our breath in this whirlwind of early retirement with young children, we’re excited to ensure that our individual dreams align with our family’s collective aspirations.

Wrapping It Up

Navigating early retirement as a young family is a journey filled with challenges and immense rewards. By thoughtfully considering your family’s unique needs and remaining flexible, you can create a fulfilling post-work life that benefits everyone. Remember, the goal isn’t just to retire early—it’s to build a life that aligns with your family’s values and aspirations.

As we close out our first five years of this adventure, we’re filled with anticipation for what the next five will bring. We’re as content as seagulls with French fries, to use a beachy metaphor fitting our Florida lifestyle. In Spanish, I’d say, “Esperamos seguir tirando sin que la cuerda se rompa.” We hope to keep going without the rope breaking. And if we stumble? “Y si tropezamos, seguiremos intentando.” We’ll keep trying. The key is to get up and keep moving forward.

Early retirement has given us the freedom to craft our lives around our family’s needs and dreams. We’re present for every milestone, free to pursue our passions, and able to prioritize experiences over possessions. While it’s not always smooth sailing, the ability to shape our family’s future makes every challenge worthwhile.

Are you a young family considering early retirement? What challenges or opportunities do you foresee? Share your thoughts in the comments below!