Lean fire: 3 barrier to consider before you retire

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The internet is filled with “FIRE”. Thanks to social media influencers.

FIRE stands for financial independence and retiring early. Although, FIRE has evolved into various stages like coast fire, fat fire, etc.

Lean fire is the stage that we have covered in this article.

What is lean fire?

Lean fire is a stage where your investment portfolio generates income at a safe withdrawal rule of 4 %, which is enough to cover the basic needs of life. It means you will do well if you are okay to continue your life on the path of minimalism and sheer frugality.

If you are a person who dislikes keeping up with Jones, then there is no harm in trying Lean fire.

Basic necessities:

  • Housing
  • Food
  • Transportation
  • Health insurance

The income to cover the basic needs of your lifestyle varies based on variables like your income level, savings rate & spending rate.

How do you calculate your lean fire number?

Your lean fire number is based on Your spending expenses.

In the Internet, you might have seen people achieve the Lean fire stage when their investments could take care of their annual expenses of $40000 or $50000. 

They could be single, have no mortgages, and have no family members dependent on them like kids, elderly parents, etc.

Just in case, your annual spending expenses are $100,000. Then your lean fire number varies.

Lean fire calculator:-

Annual expenses x 25 = Lean fire number.

$100,000 *25 = $2.5 million.

Your nest egg should be $2.5 million to manage your annual expenses of $100,000 at a 4% safe withdrawal rate.

In the below table, you can find your nest egg number based on your annual expenses.

Lean fire calculator

An average median household income of an American family is $50,000 per year. If they spend $30,000 on their essentials, then their investment portfolio should be $750,000 (considering a 4% withdrawal) to meet their essential annual expenses.

This is encouraging, however, considering retirement after reaching the Lean fire stage should be given forehand thought.

In this stage of retirement, your survival would be easy by adopting a minimalistic lifestyle. However, this stage of fire has its limitations.

3 barriers to consider before you retire

Market volatility

Investing in stocks always seems to be risky due to their volatility.

Depending on a smaller investment portfolio for your monthly expenses during a market drop could deplete your investments quickly.

A big market crash has the potential to change your status of financial independence at once.

Lifestyle inflation

There is nothing that could do more to your money than Lifestyle inflation.

As the year passes, your purchasing power for your fixed annual expenses can reduce. In other words, you will end up purchasing fewer things for the same amount of money.

You cant spend a lot in your lean fire retirement. You should be okay with maintaining the same lifestyle at your retirement too.

Cost of living

If you thought of moving after your retirement, you should be probably moving to an area where it has a similar cost of living.

Moving to a metropolitan city could invalidate your lean fire number due to the high cost of living.

It is preferable to live in the countryside or suburban to protect your retirement.

Related read:13 Extreme frugal living tips to try

How to solve the 3 Barrier ?

Emergency cash: 

Having cash in bank accounts for three or six months’ expenses would be a nice hedge against market crashes or unforeseeable circumstances.

This period would give you enough time for your portfolio to recover a bit or completely from the market crash.

Side hustle:

Having a side hustle even in your retirement can help you fulfill your desires for the occasional splurge on things you want.

A side hustle could be a part-time job in a nearby café, or grocery store, online work, or freelancing on platforms like Fiverr.

Side hustle or part-time income will give you a nice cushion apart from the income from your portfolio.

After all, retirement is meant for taking more vacations, pursuing your hobbies, and creating memories with loved ones. To put it in simple point, doing things that you can’t do or couldn’t do when you are in a 9-5 job.

If such experiences could be achieved whether, by Fat fire or lean fire, it doesn’t matter. What matters is ” You live your life to the fullest”.


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