# Coast FIRE With Kids: How to Plan Around the Childcare Years

> Daycare can eat your retirement savings for five years. How to plan for that with Coast FIRE: save before kids, keep the match, and use 2026 tax breaks.

Source: https://mycoastfire.com/blog/coast-fire-with-kids
Last updated: 2026-09-22

Plenty of parents cut retirement savings while they pay for daycare. The cut does far less damage if you plan it in advance and never drop to zero.

Saving for retirement with young kids works best when you treat the daycare years as a planned dip: save hard before the first baby, keep at least the employer match going while you’re paying for care, and step back up the month daycare ends. Coast FIRE math shows why the order matters, because money you invest before kids keeps compounding through the years when you can barely add anything.

## What does childcare actually cost?

More than rent, in a lot of places. Child Care Aware of America’s [2025 price report](https://info.childcareaware.org/media/child-care-prices-rival-major-household-expenses), published in May 2026, puts the national average price of care at $13,184 a year. That’s about 10% of median income for a two-parent household and 33% for a single parent. In every state with data, center care for two children costs more than median rent.

The Department of Labor’s National Database of Childcare Prices tells the same story county by county. Using 2022 prices, [the Women’s Bureau found](https://www.dol.gov/newsroom/releases/wb/wb20241119) families spent between 8.9% and 16% of median family income on full-day care for one child, depending on the type of care and the child’s age.

Now stack two kids a couple of years apart and you can easily be paying for care for five years or more. For a lot of parents those years land in their early 30s, right when a Coast FIRE plan wants your contributions to be doing the most work.

## Strategy 1: save hard before the baby, then ease off

Here’s an example. Hana and Luis are 29, have $65,000 invested and put $2,000 a month into their 401(k)s, counting the match. They want to retire at 65 on $65,000 a year, which makes their Coast FIRE number $412,266 today. They expect a first baby at 31 and five years of daycare, with a second child overlapping.

During those five years their target keeps climbing. By 36 their Coast FIRE number is $538,274, because the money has fewer years left to grow. Every scenario below goes back to $2,000 a month at 36.

| Ages 29 to 31 | Ages 31 to 36 | Balance at 36 | Coast FIRE age |
| --- | --- | --- | --- |
| $2,000 a month | $2,000 a month (no childcare squeeze) | $277,000 | 50 |
| $2,000 a month | Nothing | $145,000 | 61 |
| $2,000 a month | $600 a month | $185,000 | 57 |
| $4,000 a month | Nothing | $205,000 | 55 |
| $4,000 a month | $600 a month | $245,000 | 52 |

The first row is the plan they’d have had without kids. The second is what a lot of parents actually do: a full stop, and a Coast FIRE date that slides to 61. That’s 11 years later for five years of zero contributions.

Front-loading is the fix you can only use before the baby arrives. Two years at $4,000 a month instead of $2,000 gets them to $170,000 at 31, and that extra money keeps [compounding](https://mycoastfire.com/compound-interest-calculator) through five years in which they add nothing. Their date comes back to 55. Combine it with a small contribution during the daycare years and it’s 52.

Front-loading only helps if the baby hasn’t arrived yet. The step-up at the other end works for everyone. If Hana and Luis move part of the old daycare bill into their 401(k)s at 36 and contribute $2,500 a month instead of $2,000, the third row moves from 57 to 51. The month the last daycare invoice stops is the easiest raise you’ll ever give your retirement, because you’re already living without that money. If your kids are already in care, the [Coast FIRE number at 35](https://mycoastfire.com/coast-fire-number-by-age/35) page runs a case that starts mid-daycare.

Hana and Luis at 36, after daycare

Starts from their balance after five years at $600 a month, with part of the old daycare money going into their 401(k)s.

[Open the calculator with these numbers](https://mycoastfire.com/?age=36&spend=65000&assets=184709&contrib=2500)

## Strategy 2: keep the employer match no matter what

The $600 a month in that table isn’t a random number. Say Luis earns $80,000 and puts 6% of his pay, $400 a month, into his 401(k), and his employer adds 50 cents per dollar on that 6%. That’s $200 more, for $600 a month going in while only $400 leaves his paycheck, and less than that after the tax deduction on a pre-tax contribution.

That’s the contribution I’d protect above almost everything else during the childcare years. A 50% match is an instant 50% return, and a dollar-for-dollar match is 100%. Nothing you’ll find to cut in the household budget pays like that. Check your plan’s match formula and vesting schedule, and set your contribution to the exact percentage that collects all of it.

In the example, that $600 a month is worth 4 years of Coast FIRE date compared with a full pause. The balance is only about $40,000 higher at 36, but that money has 29 years to grow.

## What tax help do parents get in 2026?

More than last year. The 2025 tax law changed several things for parents, and two of them are aimed squarely at childcare.

The dependent care FSA limit went from $5,000 to $7,500 a year ($3,750 if married filing separately), per [IRS Publication 15-B](https://www.irs.gov/publications/p15b). Money that goes through the FSA skips federal income tax and Social Security and Medicare tax. For a married couple in the 22% bracket, running $7,500 of daycare through it saves about $2,200 a year in federal taxes, before any state savings.

The child and dependent care credit got bigger for middle incomes. It still applies to up to $3,000 of care costs for one child or $6,000 for two or more, per [IRS Topic 602](https://www.irs.gov/taxtopics/tc602). What changed is the percentage. Under [section 70405 of the law](https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf), starting in 2026 it’s 50% at the lowest incomes, falls to 35% once adjusted gross income passes $43,000, stays there up to $75,000 ($150,000 on a joint return), then slides down to 20%. Before, anyone over $43,000 was at 20%. A married couple with $120,000 of AGI and two kids in care now gets up to $2,100 instead of $1,200. Both spouses generally need earned income to claim it, and the credit isn’t refundable.

You can’t count the same dollars twice, though. FSA money comes off the $3,000 or $6,000 limit, so a household that uses the full $7,500 FSA has nothing left for the credit. For most two-income couples in the 22% bracket or higher, the FSA comes out ahead. At lower incomes the credit can win, as long as you owe enough tax to use it. Tax software will run both.

The child tax credit for 2026 is up to $2,200 per child under 17, and up to $1,700 of it is refundable, according to [Rev. Proc. 2025-32](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf). The [IRS](https://www.irs.gov/credits-deductions/individuals/child-tax-credit) says the full amount is available with income up to $200,000, or $400,000 filing jointly. If you get a refund because of it, sending that money straight to an IRA is a painless way to keep contributing through the tight years.

One more for babies: children born from 2025 through 2028 who are US citizens with a Social Security number can get a one-time $1,000 federal deposit into a [Trump account](https://www.irs.gov/trumpaccounts). You elect it on Form 4547. It costs you nothing, so claim it.

## 529 or retirement: which comes first?

Retirement, for most families. It’s the usual advice for a good reason: your kids can borrow for college, get grants or pick a cheaper school, and nobody will lend you money to retire. There’s a financial aid angle too. The [2026-27 Federal Student Aid Handbook](https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2026-2027/application-and-verification-guide/ch2-filling-out-fafsa-form) says 401(k)s and IRAs aren’t counted as assets on the FAFSA, while a parent-owned 529 for the student is.

A 529 still makes sense in a few situations. You’re on track for Coast FIRE, or [already past it](https://mycoastfire.com/blog/what-to-do-after-coast-fire), and have money left over. Your state gives you a tax deduction or credit for contributing to its plan. Grandparents want to help and need somewhere to put it. Or you’re planning on private school, since from 2026 a 529 can pay up to $20,000 a year of K-12 costs per student, double the old $10,000 limit.

The fear that stops many parents from using a 529 is overfunding it. That’s less of a problem than it used to be. [IRS Publication 590-A](https://www.irs.gov/publications/p590a) lays out the rollover to a Roth IRA: the Roth has to be in the beneficiary’s name, the 529 must have been open more than 15 years, contributions from the last five years (and their earnings) don’t qualify, each year’s rollover counts against that year’s Roth IRA limit, and the lifetime cap is $35,000. At the 2026 IRA limit of $7,500, moving the full amount takes about five years. It’s a decent safety valve for leftover money, not a reason to overfill the account.

## Where does term life insurance fit?

Every Coast FIRE number assumes two things: your portfolio stays invested until retirement, and your paycheck covers today’s bills until then. With small kids, the death of either parent breaks the second assumption. The surviving parent suddenly pays for everything, often including more childcare.

Level term life insurance is the usual tool for this. You pick a coverage amount and a term, commonly 20 or 30 years, long enough to get your youngest to adulthood. Cover both parents, including one who stays home, because replacing the unpaid work costs real money. And don’t rely only on the policy through work, since group coverage usually ends, or has to be converted to an individual policy, when you leave the job, which is exactly what many people on Coast FIRE plan to do.

Once you’re well past your Coast FIRE number and the kids are nearly grown, you may need much less coverage, so there’s little point locking in a policy that runs to 70.

## How do kids change your retirement spending?

Less than your current budget suggests. If you build your retirement spending figure from what you spend now, it’s full of costs that won’t exist at 65: daycare, diapers, a bigger grocery bill, activities, maybe a bigger car. If Hana and Luis planned around their current $95,000 a year instead of $65,000, their FIRE number would jump from $1,625,000 to $2,375,000, and they’d be saving for a retirement full of expenses they won’t have.

College mostly hits before retirement, not during it. With kids born in your early 30s, tuition bills arrive somewhere between your late 40s and late 50s. On a Coast FIRE plan that’s the coasting stretch, so it comes out of paychecks and any 529, not your retirement portfolio. Plan for it, but don’t add it to your retirement spending.

Adult kids are the part people forget. In a [Pew Research Center survey](https://www.pewresearch.org/social-trends/2024/01/25/parents-young-adult-children-and-the-transition-to-adulthood/), 59% of parents of 18- to 34-year-olds said they’d helped their kids financially in the past year. If you’d like to be able to help with a first apartment or a wedding, add a line for it. The trick from our [Social Security post](https://mycoastfire.com/blog/coast-fire-with-social-security) works here: for $5,000 a year over your first ten retirement years, add $50,000 × 4% = $2,000 to the yearly spending you put in the [Coast FIRE calculator](https://mycoastfire.com/).

This breaks down if you expect to support an adult child long term, for example one with a disability. That’s a permanent line in the budget, and it deserves its own plan with a specialist, not a rough percentage.

## Questions people ask

### Should I stop retirement contributions while I'm paying for daycare?

I wouldn't stop completely. Keep at least enough going to collect your full employer match, since that money is half free. In the example in this post, keeping $600 a month going for five years instead of pausing moved the Coast FIRE age from 61 to 57.

### Can I use a dependent care FSA and the child and dependent care credit in the same year?

Yes, but the FSA money comes off the expense limit for the credit, which is $3,000 for one child or $6,000 for two or more. If you run the full $7,500 through an FSA in 2026, there's nothing left to claim the credit on.

### Should I save for my kids' college or my own retirement first?

Your retirement, in most cases. Your kids can borrow for college and you can't borrow for retirement. Retirement accounts also don't count as assets on the FAFSA, while a parent-owned 529 does.

### How much is the child tax credit in 2026?

Up to $2,200 per child under 17, with up to $1,700 of that refundable as the additional child tax credit. The full credit is available with income up to $200,000, or $400,000 on a joint return.

## Keep reading

-   [Coast FIRE number at 35The age when contributions often shrink.](https://mycoastfire.com/coast-fire-number-by-age/35)
-   [Coast FIRE for couplesTwo incomes, one plan.](https://mycoastfire.com/blog/coast-fire-for-couples)
-   [How to reach Coast FIREA realistic plan, with timelines.](https://mycoastfire.com/blog/how-to-reach-coast-fire)