If you want to retire early on a minimalist budget, Lean FIRE could be the path for you. If your goal is to retire early, it is smart to know exactly how much you will need to retire and how long it will take you to get there.
That’s exactly why we built the Lean FIRE calculator below. You can use it to work out your Lean FIRE number as well as the age you will reach retirement.
Lean FIRE Calculator
How To Use The Lean FIRE Calculator
To use this calculator fill in the 9 inputs and the calculations will automatically run to give you your Lean FIRE age and number. Here’s exactly what everything on the calculator means:
Inputs
Age: The age you are currently or the age you plan to start working towards Lean FIRE
Current Annual Income: This is your current after-tax annual income. You can figure this out by multiplying the monthly salary you receive in your bank by 12 or looking at your P60 for your yearly net income. You can also add any income you get from side hustles etc here.
Current Annual Spending: This is how much you are spending on a yearly basis. You can take your monthly expenses and multiply them by 12 but also remember to think about those one-off purchases such as holidays that may only happen once a year.
The difference between current annual income and annual spending is how much you are saving in your portfolio each year. You can see this figure calculated under “Current Annual Savings”.
Current Savings/Investments: This is the current value of your investment portfolio/savings.
Annual Spending When Lean FIRE’d: This is how much you plan to spend each year when you retire.
Annual Return On Investment: This is the average return you expect to get on your investments.
Safe Withdrawal Rate: This is the % of funds you can expect to safely withdraw from your portfolio each year without them running out. Most people will use 3 or 4% for this calculation. You can view the study on the 4% rule here.
Planned Retirement Age: This is the age you plan to retire at. At your planned retirement age, the calculator assumes you stop earning income. You can set this to the traditional retirement age of 65 if you are unsure when you will retire.
Inflation: Inflation will reduce your spending power as you age. Adjusting this number will adjust your results into inflation-adjusted £’s with the same spending power as today.
Once you have input all of this information, you will receive the age you can expect to reach your Lean FIRE number and the Year you will reach it.
Outputs
Age to FI/RE: This is the age you are expected to reach your Lean FIRE number.
FI/RE In Year: This is the year you will reach your Lean FIRE number.
Current Annual Savings: This is how much you are saving yearly.
Current Savings Rate: % Of Your Income that you are currently saving.
Required Savings For Lean FI/RE: This is your Lean FIRE number. How much you will need to safely retire early.
Check out our full guide to Lean FIRE and how you can get there as fast as possible.
How Lean FIRE Works
Lean FIRE works the same way that traditional FIRE works. You are attempting to save and invest into a nest egg which is 25 times your annual expenses. Having a portfolio this size theoretically allows you to draw 4% per year from your portfolio without your portfolio losing value.
The difference between Lean FIRE and Traditional FIRE is how you get there and what your lifestyle will look like after retirement. People who follow a Lean FIRE plan typically live a very minimalist and frugal lifestyle. They likely live in a very cheap part of the country and don’t treat themselves to luxuries very often.
Lean FIRE gives you enough money each year to cover your basic living expenses such as housing costs, food and transport but does not allow for much more.
Many pursue Lean FIRE to pursue a life they are passionate about rather than work a job they hate each day. While living this frugally all your life is not something I’m interested in, it may be for you. Let’s take a look at how you can reach your Lean FIRE Number.
How To Calculate Your Lean FIRE Number
Calculating your Lean FIRE number works the same way as calculating a traditional fire number. Take your annual expenses and multiply them by 25. Once you reach this number you can withdraw 4% per year relatively safely without your portfolio value dropping.
Lean FIRE = Annual Expenses In Retirement x 25
For example, if you spend £25,000 a year and plan to keep it that way during retirement you would need £625,000 to FIRE.
Example: £25,000 x 25 = £625,000 <– Lean FIRE Number
If you reached this number and decided you actually wanted to live a more luxurious lifestyle in retirement you could continue to invest and increase your yearly withdrawal amount.
If you want to calculate your FIRE Number you can use the calculator below.
Lean FIRE Example
Sarah decides that she wants to retire before the traditional retirement age of 65. She’s okay living a simple life and doesn’t need to spend a lot of money on luxuries. She’s currently 30 and has £100,000 in investments. She’s earning £40k per year after tax and is currently spending £20k living a frugal lifestyle.
She knows she will need at least £20k per year when she retires. To reach her Lean FIRE target she needs to hit £625,000 in her portfolio. At a 7% return, investing £1666 per month she will reach her Lean FIRE Target in 13 years at 43 years old.
At this point she could decide to retire and live extremely frugally on £20k per year at the safe withdrawal rate of 4% or she could continue to invest for a few more years and give herself a larger yearly withdrawal.
Final Thoughts
Hopefully, you have found our Lean FIRE calculator useful. You now know how much you will need to retire and live a lean lifestyle. I would love to hear in the comments how much you need to go Lean FIRE.
If you want to see our full guides to each type of FIRE check them out below: