You're Not Ready To Retire Early Unless Your Children Do This First

If you're thinking about early retirement, you generally need to be a high earner, a big saver, or both — and doubly so if you plan to retire in your 30s. Regardless, if your portfolio has reached the required size for early retirement, it can be hard to justify toiling away at a day job when you could be spending the time on yourself, your partner, or your kids. But here's the kicker: These same children could become a serious burden in the golden years if they still rely on you financially, so you shouldn't retire until they reach financial independence.

The first problem is that mathematically, those retiring early would generally have younger children. According to a Brookings report, raising a child to age 17 runs a middle-income U.S. household about $310,605, when adjusted for inflation. That's before college even enters the picture. Add a typical four-year degree, and you're looking at roughly another $124,000 at the low end, at an in-state public school, or up to about $262,000 at a private nonprofit, per a CollegeBoard report. Assuming you help your kids with tuition, the total expenses could balloon to between $430,000 and $570,000 per child. Even if financial aid lowers the college bill, you'll still be committing hundreds of thousands of dollars during the years your portfolio should be steadily growing.

Say you pull $300,000 out of your portfolio in your 30s or 40s to cover child-related costs. At a conservative 7% annual return, that money could have doubled to almost $600,000 in 10 years and grown to just under $1.2 million in 20 years. That sum alone is more than enough money to retire in several southern states — cost of a house included. Instead, you spend it on your kid's housing, food, tuition, and everything in between. Now stretch that timeline to a more typical retirement horizon. Left untouched for 30 years, that same $300,000 could grow to roughly $2.3 million at 7%.

If you're handing these tuition or child-related expenses while still in the workforce, you can at least offset them with your salary and bonuses. On the other hand, as a retiree, you'd end up funding these expenses by leaning on assets that were meant to support decades of withdrawals. 

Ultimately, supporting children financially in retirement also exposes you to greater volatility. As a high earner, you are probably used to a certain lifestyle, and you may have to compromise on it if the market drops or you experience bad years. You might have even less flexibility if your child still needs financial assistance later into your retirement. Delaying retirement until your children are independent could be your best move for insulating yourself — and them — from an uncertain future.