Lean FIRE Calculator

Understanding the Lean FIRE calculator — concept and principle

FIRE stands for Financial Independence, Retire Early. Lean FIRE is the frugal version: building a portfolio large enough to cover a minimal budget, roughly the cost of basic needs, so that work becomes optional sooner. This calculator gives the portfolio target for your planned spending and withdrawal rate, the monthly budget it supports, the target as a multiple of spending, and an estimate of how many years of saving it takes to get there.

How it is calculated

• Target portfolio T = annual spending ÷ withdrawal rate
• Multiple of spending = 1 ÷ withdrawal rate (25× at 4%)
• Monthly spending = annual spending ÷ 12
• Years to target: starting from current savings B, each year B = B × (1 + real return) + yearly saving, counted until B reaches T

The return is a real return, after inflation, so all amounts stay in today's money.

The principle

The target comes from the safe withdrawal rate idea. William Bengen's 1994 study of US market history found that withdrawing about 4% of the starting portfolio, then adjusting that amount for inflation, would have lasted at least 30 years in every historical period he tested for a stock-bond mix. Dividing spending by the rate turns that into a portfolio size. Lean FIRE simply applies it to a small budget, so the target is reached faster. The years estimate is ordinary compound growth with a contribution added at the end of each year.

Worked example

1. Spending $25,000 a year, savings $150,000, saving $30,000 a year, real return 5%, withdrawal rate 4%.
2. Target = 25,000 ÷ 0.04 = $625,000, which is 25× spending; monthly budget = 25,000 ÷ 12 ≈ $2,083.
3. Year 1: 150,000 × 1.05 + 30,000 = 187,500; year 2: 226,875.
4. Year 10: about 621,671, still short; year 11: about 682,755, past the target.
5. So the target is about 11 years away.

How to read the result

A lean budget leaves little room for surprises such as health costs or repairs, so many people add a buffer or keep some part-time income. A lower withdrawal rate, such as 3.5%, raises the target but makes it more robust for a retirement longer than 30 years. Rough US rules of thumb put Lean FIRE below about $40,000 a year of spending; adjust for local costs.

Common mistakes

• Using a nominal return together with today's spending.
• Leaving out health insurance, taxes and irregular large costs.
• Treating the 4% rule as a guarantee.

Frequently asked questions

What is the difference between Lean FIRE and Fat FIRE?

The same formula with different budgets: Lean FIRE covers basic needs, Fat FIRE a comfortable or generous lifestyle.

Is 4% safe for a 40-year retirement?

Many planners use 3.5% or less for very long horizons, since the original study covered 30 years.

What real return should I use?

A conservative figure; try several values to see how sensitive the date is.

Sources: W. P. Bengen (1994), "Determining Withdrawal Rates Using Historical Data", Journal of Financial Planning · P. L. Cooley, C. M. Hubbard, D. T. Walz (1998), "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable", AAII Journal