article today on Lean vs FatFIRE

[Earl E Retyre]

There is an article today on MSN:
https://www.msn.com/en-us/money/ret...how-much-you-spend/ar-AAJQA5o?ocid=spartandhp

They define Lean and Fat FIRE as:
"The average US household spends about $61,000 a year, according to Census data. LeanFIRE is when someone has saved up 25 times their annual expenses - the traditional benchmark for financial independence - and spends less each year than the average American. FatFIRE, by contrast, is when someone who has reached financial independence spends more than average."

The article suggests that someone living in NY that spends $100k/year to live is an example of Fatfire.

 

[audreyh1]

$100K per year is definitely fatFIRE around here, but in NY? Not so sure.....

 

[USGrant1962]

That is not the common definition of fat FIRE and lean FIRE. While there is no official definition, most discussions of those suggest spending substantially more than average for fat FIRE, and substantially less than average for lean FIRE. There is a wide band in the middle that is just FIRE.

 

[GrayHare]

+1

Without a middle ground one could go from underweight to overweight by eating a lettuce leaf.

 

[Earl E Retyre]

+1

Without a middle ground one could go from underweight to overweight by eating a lettuce leaf.

That is a good analogy. Unless the lettuce leaf is romaine and came from Salinas Valley.

 

[RenoJay]

Gees, based on those definitions, I am Obese-Pre-Diabetic-Fat-As-Hell FIRE with annual spend ~$200k, not including taxes which in some years are significantly higher than the consumption spending. Oh well. I guess I could lose the FIRE weight if required.

 

[CaliKid]

Gees, based on those definitions, I am Obese-Pre-Diabetic-Fat-As-Hell FIRE with annual spend ~$200k, not including taxes which in some years are significantly higher than the consumption spending. Oh well. I guess I could lose the FIRE weight if required.

It's all relative though. Some feel $300k is not enough. Depends on how you are accustomed to spending, where you live, etc.... To them you are just fat fire and maybe it takes $500k annual spend to make the OPDFAHF category!?

 

[RenoJay]

It's all relative though. Some feel $300k is not enough. Depends on how you are accustomed to spending, where you live, etc.... To them you are just fat fire and maybe it takes $500k annual spend to make the OPDFAHF category!?

[emoji23]

 

[Gumby]

I wonder how the Board of Official Retirement Definitions will come down on this?

To my mind, the terms Fat FIRE and Lean FIRE have nothing to do with how much you spend relative to other people. Nor do they have anything to do with the absolute level of your spending . Rather, they refer to your safety margin. If you can easily meet your spending needs and don't have to worry about an unexpected expense or a market downturn, you are Fat FIREd. If your margin is smaller and you would need to cut back in the event of a market downturn or unexpected expense, you are Lean FIREd. That depends solely on the ratio of your own unique expenses to assets.

 

[TheHobbit]

$100K per year is definitely fatFIRE around here, but in NY? Not so sure.....

I'd say in the vast majority of the world $100k USD is fatFIRE, for those who are pulling in taxable accounts this is largely tax free, so consider this is the equivalent of a working person having to make ~$140k @ 30% marginal tax rate.

By almost any measure, that's a very good income in the vast majority of the world & US states.

 

[Perryinva]

Way lotta assumptions there! I (will) have 100k fixed income and it is most definitely not “largely tax free”, $60k in pensions and $40k SS for instance. So for us, in no way is that portion of it the equal of a 40% higher working income. We do save the 7+% being FICA & Med free, but HC (even on Medicare) is far higher than what we paid (HSA which yielded a nice Super Roth addition, also lost) when working, ut still a sizable net gain there. And we only pay tax on 85% of our SS income.

The biggest gain though is no longer funding savings to retire. I used the “all raises go to savings” strategy for almost 20 years, so was putting away better than $40k/yr at the end. No longer doing that as untouchable delayed gratification means whatever income we decide to live on, has a far larger percentage as spendable. We were comfortable living on a net income (after taxes and savings) of $7k/m, but we now easily have $12k/m if we want, with about half the taxes (and no e of the forced savings) we used to pay for roughly the 10-20% higher gross income when employed. Ingrained behavior means we won’t spend that much a month, so a surplus builds to account for inflation down the road. Fatfire for sure, but not that fat.

 

[Bigdawg]

I wonder how the Board of Official Retirement Definitions will come down on this?

To my mind, the terms Fat FIRE and Lean FIRE have nothing to do with how much you spend relative to other people. Nor do they have anything to do with the absolute level of your spending . Rather, they refer to your safety margin. If you can easily meet your spending needs and don't have to worry about an unexpected expense or a market downturn, you are Fat FIREd. If your margin is smaller and you would need to cut back in the event of a market downturn or unexpected expense, you are Lean FIREd. That depends solely on the ratio of your own unique expenses to assets.

Respectively disagree, but I haven't even been nominated to the board yet. When are the next elections?

If a person with 20 mil in their stash only spends 100K/yr they are FAT FIRE because of their margin? Hmmm. Maybe we are thinking the same way but my idea of lean FIRE is say you absolutely need 100K/yr and you have only 100K. That is lean. Say you NEED that same 100/yr but can easily (and do) spend 200k/yr. That is FAT FIRE. For instance my planning tells me I will need 80-90K year for lean FIRE. I will have available to me closer to 150k/yr when we start and closer to 200K/year at 68-70.

 

[Gumby]

Respectively disagree, but I haven't even been nominated to the board yet. When are the next elections?

If a person with 20 mil in their stash only spends 100K/yr they are FAT FIRE because of their margin? Hmmm. Maybe we are thinking the same way but my idea of lean FIRE is say you absolutely need 100K/yr and you have only 100K. That is lean. Say you NEED that same 100/yr but can easily (and do) spend 200k/yr. That is FAT FIRE. For instance my planning tells me I will need 80-90K year for lean FIRE. I will have available to me closer to 150k/yr when we start and closer to 200K/year at 68-70.

I think you and I are on the same wavelength. To go through my life exactly as I did before I retired costs $X. I have sufficient funds available to spend $2X (a 100% margin of safety). I call that fat FIRE. If I had funds sufficient only to spend exactly $X, I'd have to cut back in a market downturn or if faced with an unexpected expense (a 0% margin of safety). I call that lean FIRE.

I certainly could spend more than I currently spend (extra travel, for example), but I'd still call it fat FIRE.

 

[RunningBum]

I don't get why these labels are needed. What's the point?

 

[karen1972]

The reddit thread leanFIRE is targetting under $40k and 25x, not sure how the "average" person is spending $61k given the average household income isn't even that and retirees should for the most part not have mortgages, wouldn't be paying in SS, etc.

I often hear lean fire at 4% WR and Fat FIRE at 3% WR rate as good indicator of how much risk there is in retiring early. Those that lean fire are often taking on extensive risk (not enough years into SS, very low income so no room for emergencies, 4% WRs even though they have 50 year horizons, dependent on ACA subsidies, and typically no pensions). Its the Mr Money Mustache crowd who just dont want to work the grind and are willing to take side gigs if they have to so they are not beholding to corporations.

 

[MichaelB]

I don't get why these labels are needed. What's the point?

The human species loves to categorize and compare.

 

[The Cosmic Avenger]

I don't get why these labels are needed. What's the point?

The human species loves to categorize and compare.

Also, lots of people are stuck living in the past or living for (or in fear of) the future, instead of living in the now. I know from experience I could deal with fatFIRE or leanFIRE, and find a way to be happy with either one, so I do what I can and I don't worry about it past that.

(Yes, I plan for the future, but this is why I like the "set it and forget it" plans, like the two-fund portfolio. It helps me minimize the amount of time I plan for or worry about my future.)

 

[GravitySucks]

I wonder how the Board of Official Retirement Definitions will come down on this?

To my mind, the terms Fat FIRE and Lean FIRE have nothing to do with how much you spend relative to other people. Nor do they have anything to do with the absolute level of your spending . Rather, they refer to your safety margin. If you can easily meet your spending needs and don't have to worry about an unexpected expense or a market downturn, you are Fat FIREd. If your margin is smaller and you would need to cut back in the event of a market downturn or unexpected expense, you are Lean FIREd. That depends solely on the ratio of your own unique expenses to assets.

We met in our lair deep in the mountain under Davos to discuss this article and have declared:
Fat FIRE is spending over 110% of last worked years income net of taxes and savings.
Lean FIRE is spending under 80% of last worked year income net of taxes and savings.
We also reaffirmed that:
It only early retirement if you start at 55 years old or younger.
It's not retirement if you trade any time for money. Side gigs and hobby business included.
Every American should take SS at 70.

PS
This is not an elected position. We seized these positions through cunning, subterfuge, and brute strength.
We will not give it up easily.

 

[Perryinva]

Not too many people ever complained or worried about too much money. Lean FIRE sounds like that worry can still be there. MMM crowd seems to be mostly people that don’t want to work for anyone and don’t have much chance of high income, anyway. I was lucky to enjoy my well paid career 95% of the time, and for all the pieces to fall in to place better than I had originally planned.

 

[Teacher Terry]

Perry, Mr. MM tends to be very high earners that save a lot of money. Yes some are retiring on too little.

 

[FI_RElater]

We met in our lair deep in the mountain under Davos to discuss this article and have declared:
Fat FIRE is spending over 110% of last worked years income net of taxes and savings.
Lean FIRE is spending under 80% of last worked year income net of taxes and savings.
We also reaffirmed that:
It only early retirement if you start at 55 years old or younger.
It's not retirement if you trade any time for money. Side gigs and hobby business included.
Every American should take SS at 70.

PS
This is not an elected position. We seized these positions through cunning, subterfuge, and brute strength.
We will not give it up easily.

only 110%.... that's just "FIRE" (re: the above lettuce comment)

The I.R.P. define it as, at least 2 1/2 X of income with all needs and most all "wants" True FatFIRE participants can, for example, walk right into dealership and pay cash for whatever vehicle they want....

We're FI, already retired (but only at 59 at the time so not really "early") with pension and under 2% wr and able to pull the cord on SS anytime we want (already past early claiming) with no debt (house/vehicles/ etc paid off ).....and we don't consider ourselves in "FAT" retirement, just "comfortable"

 

[RunningBum]

The human species loves to categorize and compare.

That might not be one of our better traits.

 

[tmm99]

I wonder how the Board of Official Retirement Definitions will come down on this?

To my mind, the terms Fat FIRE and Lean FIRE have nothing to do with how much you spend relative to other people. Nor do they have anything to do with the absolute level of your spending . Rather, they refer to your safety margin. If you can easily meet your spending needs and don't have to worry about an unexpected expense or a market downturn, you are Fat FIREd.

My sentiment exactly!

 

[brett]

Labels to us are meaningless.

I think the goal should be to have a retirement that you are happy with. Does not matter if others consider it lean or fat. That is of no consequence.

I do not understand the point of the article other than to fill up copy space. Seems to me that it is self evident and not deserving of several columns of print. Pure filler.

 

[Dd852]

Sigh. Just today my DW said I was having a FATFire...and she wasn’t referring to spending at all.