FatFIRE Canada and LeanFIRE Canada are two ends of the FIRE retirement strategies spectrum that Canadians use to plan early or comfortable retirement. FIRE retirement strategies ranges from frugal, minimalist LeanFIRE to high-spending FatFIRE — each requires different savings targets, investment approaches and tax planning. This guide helps you compare the two, test which fits your situation, and build a Canada-specific plan that considers RRSPs, TFSAs, CPP/OAS and banking realities like chequing and mortgage costs.
Quick overview: FatFIRE vs LeanFIRE
FatFIRE Canada: Aim for a larger retirement nest egg to maintain a high-consumption lifestyle (travel, second home, premium healthcare coverage, charitable giving).
LeanFIRE Canada: Aim for a smaller nest egg by living frugally, reducing expenses, or replacing some expenses with low-cost alternatives (downsizing, DIY healthcare top-ups).
Shared foundation: Both strategies need consistent saving, sensible investing, tax planning and contingencies for healthcare and long-term care.
How to decide which strategy fits you
Define your target retirement lifestyle.
Estimate annual retirement spending today — include housing, travel, leisure, gifts and health-related out-of-pocket costs.
Calculate a target nest egg.
Multiply desired annual spending by a safe withdrawal factor (see "withdrawal rules" below).
Map your income sources.
Add projected CPP, OAS, workplace pensions, part-time income and passive income.
Choose Lean or Fat and set deadlines.
Pick a target age and savings rate that match the nest egg timeline.
Create a tax-efficient investment and withdrawal plan.
Coordinate RRSP, TFSA, non-registered accounts and pension income splitting where it applies.
Targets and maths: What nest egg do you need?
LeanFIRE target example: If you plan to spend $30,000/year in retirement and use a 3.5% withdrawal rate, you need about $857,000. Note: a lower withdrawal rate increases safety but requires more savings.
FatFIRE target example: Spending $80,000/year at 3.5% implies about $2.29 million.
Key Canadian considerations
CPP and OAS will reduce required savings. Check your CPP estimate and OAS eligibility via the Government of Canada pages before finalising targets: Canada Pension Plan (CPP) overview and Old Age Security (OAS) eligibility.
For accuracy, use the after-tax amounts you'll need (consider provincial tax differences).
Withdrawal rules and safety
4% rule is a common starting point but may be optimistic for long retirements or volatile markets.
Consider using a 3–3.5% rule if you retire early (30+ year horizon).
Use a dynamic withdrawal strategy (spend less in down markets) to extend longevity of savings.
Tax-efficient accounts and sequence of withdrawals
RRSP/RRIF: Tax-deductible contributions but fully taxable on withdrawal. Good for high earners pre-retirement. Consider income smoothing and the timing of RRSP-to-RRIF conversions.
TFSA: Tax-free growth and withdrawals — ideal for flexible withdrawals at any time.
Non-registered accounts: Useful after RRSP/TFSA limits are hit; watch capital gains and dividend tax credits.
Pension income splitting can reduce household tax at retirement — check CRA guidance: CRA - Income splitting for pensions.
Suggested withdrawal order (typical but depends on tax situation):
Taxable (non-registered) accounts for growth and capital gains management.
TFSA to cover shortfalls or tax-free spending.
RRSP/RRIF to fill remaining needs, mindful of marginal tax rates and OAS clawback.
Investing approach per strategy
FatFIRE Canada:
Higher allocation to equities and alternative income (real estate, private equity) to achieve larger balances.
Consider rental properties or a portfolio of REITs; account for landlord expenses and CMHC rules if using mortgages. See general housing guidance at National Housing Strategy - CMHC.
LeanFIRE Canada:
Focus on low-cost, broadly diversified ETFs/mutual funds.
Emphasize dividend ETFs, bond ladders and cash buffers to reduce sequence risk.
Budget and expense checklist (compare)
Housing:
LeanFIRE: Downsize, mortgage-free, shared housing.
FatFIRE: Maintain primary residence, buy a cottage or second home.
Travel:
LeanFIRE: Budget travel, off-season.
FatFIRE: Frequent flights, premium accommodation.
Healthcare:
LeanFIRE: Rely on provincial coverage plus small private top-ups.
FatFIRE: Private supplemental insurance, dental/vision plans, private rehab.
Contingency:
LeanFIRE: Emergency fund 6–12 months.
FatFIRE: Emergency fund 12+ months plus dedicated long-term care reserve.
Step-by-step plan to test and execute
Build a baseline: Track current spending for 6–12 months (use FCAC budgeting tools: Financial Consumer Agency of Canada — budgeting).
Model scenarios: Create three scenarios — conservative (3% withdrawal), moderate (3.5%), aggressive (4%).
Run stress tests: Include market crashes, prolonged low returns, early healthcare costs.
Adjust savings rate: Increase savings or adjust retirement age if short.
Implement tax strategy: Maximize TFSA and RRSP contributions, optimize RRSP timing and pension splitting.
Review annually: Update projections for CPP/OAS, market returns and life events.
Risks and contingencies
Sequence-of-returns risk: Early market downturns can drastically affect long retirements — keep a cash cushion.
Healthcare and long-term care costs: Public healthcare covers basics; private services and long-term care may be costly.
Inflation: Longer retirements require inflation protection — keep a portion in equities or real-return assets.
Policy risk: Changes to OAS/CPP rules or tax law can affect projections.
Useful Canadian resources
Financial Consumer Agency of Canada — budgeting and planning
Canada Mortgage and Housing Corporation (CMHC) — housing information
Quick checklist to choose today
Define retirement spending in today's dollars.
Estimate CPP/OAS and workplace pensions.
Calculate necessary nest egg using conservative withdrawal rates.
Choose LeanFIRE if you prioritise low expenses/early retirement; choose FatFIRE if you prioritise lifestyle and can save aggressively.
Implement tax-efficient savings (TFSA/RRSP) and diversify investments.
Review annually and adapt for life changes.