Lean FIRE Calculator — Australia

The default here is $45,000 a year in today's dollars. There is no official line for "lean", but there are useful reference points. ASFA's Retirement Standard publishes "modest" and "comfortable" budgets for retirees, updated every quarter, and Moneysmart's guide to how much super you need uses them.

A lean early retirement usually sits closer to the modest end on travel, cars and discretionary spending, but it often carries costs a 65-year-old does not have, such as children at home, a mortgage or private health cover. Building the budget from your own spending, rather than a benchmark, gives a more reliable number.

Whether you own your home outright is the largest single factor in a lean budget. A paid-off home removes the biggest expense, and the home is not counted in the Age Pension assets test (Services Australia).

Renters face higher and less predictable housing costs, which a lean budget has little room to absorb. The Age Pension assets test does allow non-homeowners more assets before the pension reduces, and eligible renters can receive Rent Assistance with it.

A lean retiree usually has a long horizon and little spending that could be cut in a bad year, so this page starts at a 3.5% withdrawal rate instead of 4%. At 3.5%, the target is about 28.6 times annual spending: $1.29 million for $45,000 a year, against $1.13 million at 4%.

The withdrawal rate only sets the headline target. Whether the plan lasts is tested year by year to your plan-to age, so you can try 4% and see whether the projection still holds on your figures.

Lean retirees with modest assets are the most likely to qualify for some Age Pension from 67. Both means tests taper, so as a portfolio is drawn down, a part pension can replace some of what it no longer provides (Moneysmart).

The calculator can add a flat Age Pension from 67 under Other income & expenses. It does not apply the assets and income tests, so treat the amount as an upper limit.

A lean plan has less slack, so it is worth testing harder than a mid-range one. Three checks show how much margin there is:

• Run it at 4% as well as 3.5%. If the FIRE age barely moves, the plan does not lean on the lower rate; if it moves by years, the margin it buys is real.
• Add a one-off cost. Under Other income & expenses, add a few years of higher spending, such as a car or a new roof, and see whether the plan still holds.
• Run the [drawdown simulator](/au/drawdown-calculator) with your lean spending and the portfolio the projection reaches. Its poor-outcome figure shows what a bad run of markets would leave behind.

Medicare covers public hospital treatment and subsidises GP visits and many medicines whatever your income. Private health insurance is optional, and the Medicare levy surcharge only applies above an income threshold that many lean retirees will be under (ATO).

Dental, optical and the gaps Medicare does not cover still need a line in the budget. They are easy to leave out of a lean plan and they rise with age.