One common trait of ordinary people who accomplish extraordinary things is their ability to turn personal struggle and tragedy into resilient energy channeled toward big goals.
And one of the most challenging tragedies ordinary people commonly face is the death of an immediate family member.
This week, I talk with Adam Fortuna, an engineer who turned his mother’s untimely death into motivation to achieve financial independence and retire early – which he did at age 36 with a portfolio >$2M.
- How Adam got into software development, then transitioned into product management
- How his mother’s premature death suddenly forced him to figure out how to manage and invest assets…and why it made him realize he wanted to retire early
- How he applied an estimation technique used in the software development industry to come up with his FIRE number
- Why moving states cost him 6 figures in taxes
- How his boss reacted when he pulled the trigger and gave notice
- How his portfolio crashed 30% when he quit his job…and why that didn’t faze him
- Why he scrutinizes trailing averages (rather than specific months) when analyzing his safe withdrawal rate
- How he uses the 4% rule as a heuristic, but doesn’t apply it strictly
- How he handles health insurance post-retirement
- The simple Google spreadsheet plugin he uses to import all his financial data into Google sheets for manual number crunching
What personal life events motivated YOU to get smart about your finances? How would a windfall impact your retirement plans? Let me know by leaving a comment when you’re done.
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Links mentioned in this episode:
- Tiller (automatically export personal finance data into Google spreadsheets)
- HYW private Facebook community
Read this episode as a post:
Andrew Chen 01:22
My guest today is Adam Fortuna. Adam is a software developer who blogs at the website minafi.com, where he aims to help millennials reach financial independence through personal finance tools and content.
After spending his early career teaching people how to code, Adam, who is now early retired, spends his time these days helping other early career investors grow their personal finances using minimalist strategies. He currently lives in Salt Lake City.
I invited Adam to the podcast today to share his story and insights about retiring early from an engineering career. Adam, thanks so much for joining us.
Adam Fortuna 01:54
Hey, thanks for having me.
Andrew Chen 01:56
I’d love to start out just helping our audience orient a little bit. What year did you early retire, and how old were you at the time?
Adam Fortuna 02:05
I left my job back in December of 2018, and I was 36 years old at the time, so just almost two years ago.
Andrew Chen 02:15
Help us understand what your career path was before retiring. What were you doing at each step of the way, and what was your most recent job?
Adam Fortuna 02:29
I went to college for computer science, but then I was really bad at math, so I ended up going down to MIS and ending with an IT major after bouncing around careers.
As the years went on, I got really into this startup culture. And right around 2008-2009, I was in a lucky place where I was early in my 20s and Ruby on Rails was getting really popular and I started learning it with every spare second I had. And I was fortunate to join a startup around that time as a Ruby on Rails developer.
From then, it was software developer and then technical director, and then towards the end, I switched over to a product director/product manager role, but always around building websites.
Andrew Chen 03:44
Gotcha. What kind of websites were you building? Consumer web, enterprise?
Adam Fortuna 03:51
For the last couple of years, it was a startup called Code School. It was a startup that focused on teaching people how to code in the browser. People would watch a video and then do some challenges in the browser where they’re entering code to solve a problem, and we’re checking their code behind the scenes and seeing if it validates and does everything it needs to.
Andrew Chen 04:15
When did you decide that you wanted to retire early?
Was there a single moment where you realized that, or was it a gradual realization? Help us understand that process that you went through.
Adam Fortuna 04:34
I think for me, there were two key moments.
The first one was off of a very sad and dark time in my life. Right after I graduated college, my mom passed away, and I spent pretty much the next year of my life just emotionally and financially and physically dealing with everything that comes from that. Especially when you’re the only child of a divorced family, you’re handling everything.
So that was what got me into investing, got me to learn about all these things. But even more than that, it made me realize…my mom passed away at age 54, a year after she retired, and it made me realize I want to have more time in retirement than my mom did with one year. So that was the first one.
The second part was probably seven years later. I was investing and just working and doing the bare minimum to grow wealth that somebody does when they don’t really know much about it. And I found Mr. Money Mustache’s “Shockingly Simple” article, and that gave me almost like a finish line of how much money I would potentially need.
I think before that, I had always just assumed I’ll just keep working forever. I know I want to retire at some point earlier than my mom was able to, but I didn’t really have a framework for how to do that. So understanding that 25x mentality and how investments play into how much you need helped fill in the gaps.
Andrew Chen 06:20
Wow. Thanks for sharing that.
I’m sorry for your loss so soon, right after graduation, and so young for your mom, right after she retired. It sounds like you parlayed that into really digging and understanding personal finance a lot better, which helped you hopefully contribute to getting to where you are now.
What was the life that you envisioned having in retirement? Before you had reached that point, what did you envision early retirement being like for you?
Adam Fortuna 06:57
I think for me, it was mostly around having time to, for one, travel. I don’t know anyone who doesn’t like to travel. For me, that would look like three months out of the year traveling somewhere and still having a home base.
But for that other nine months out of the year, it means having pretty much unlimited time to work on personal projects that I enjoy and just feed my soul. For me, that’s a lot of coding projects that really serve no financial purpose and most people would say don’t serve any purpose, but they’re fun to do.
It could be as simple as going through a tutorial and learning something, and then maybe the next day trying to make something to share in Reddit. But really just having that time to experiment and explore things that I enjoy.
Andrew Chen 07:57
Got it. You mentioned that when you stumbled across the Mr. Money Mustache article, “Shockingly Simple Math Behind Early Retirement,” that helped at least make it concrete and start to give you a framework.
Was there a specific date in mind that you had after that point where you knew you wanted to FIRE, or a specific savings target that you decided you needed to hit for yourself?
Adam Fortuna 08:27
I ended up going down the rabbit hole of running all the numbers and trying to figure it all out. For my situation, I got kickstarted after my mom passed away and left me $100,000. And that’s a world-changing amount of money when you’re young.
And I was fortunate to go to a state school mostly on scholarships, so I was able to just figure out, “How do I not mess this up?”
So I had been investing just with Vanguard index funds for a couple of years by the time I read that article. And when I ran the numbers on it, I was about 30 years old at the time and I thought, “If I continue investing 30-40% of my net worth or of my yearly income, maybe I can retire early around 45-48.”
Initially, those were what I was going for. I’m like, “I’m not going to try to max this out and save 70% of my income.” I know some people are able to, but more like take it as a slow path to FIRE.
And I was fortunate enough to end up with some windfalls that ended up speeding it up even more.
Andrew Chen 09:50
Things that others can replicate or that were just very personal to your situation?
Adam Fortuna 09:58
In this case, the startup I was at was acquired, so I was able to get a windfall from that. As soon as that happened, I was like, “Maybe instead of 48, this is more like 42.”
And then the company that acquired us ended up going public. Then it was like, “Maybe instead of 42, I could do this today if I wanted to.”
And six months after the company went public, I was like, “Okay, well, I can continue working here or I can go off and do my own thing.” And it ended up being a perfect time to take a break.
Andrew Chen 10:36
How did you come up with your precise FIRE number?
What were the considerations that went into it? How did you calculate the budget or burn rate that you would need to live on?
You mentioned a moment ago that you wanted to travel in retirement and work on personal projects. How did you factor things like travel and accommodation, unexpected expenses, buffer, etc.?
Adam Fortuna 11:09
Initially, I had been tracking my yearly spending every year, so I had a good baseline for how much we were spending when we started doing these numbers. I was able to look at last year, multiply that by 25, and get a naïve estimate. “If I just keep doing what I’m doing right now, that’s how much it will be.”
But then I started doing something called a PERT evaluation (Program Evaluation and Review Technique). It’s this thing where you take the amount you think you’re going to spend, multiply it by four, and then take the low end of how much you’re going to spend, add that, and then the high end of what you’re going to spend, and add that.
Do all those together and divide it by six. So it’s like a weighted portion of your average, your high, and your low.
Using that model, we ran out, “How much would we spend on our high end financial independence?” Let’s say we travel a ton, we go skiing every year, we give a ton to charity, we support family. What does that number look like?
And then the low end, what if we don’t travel at all? What if we’re just homebodies and just make all of our food from Costco for the year?
So we took those three numbers and came up with this estimate of what our yearly spending would be like going forward and used that as the baseline for the 25x.
Andrew Chen 12:49
Gotcha. The PERT evaluation, I hadn’t heard of that in FIRE blogs or the community before.
Is that something that folks in the FIRE community are talking about, or is that from another discipline? How did you come across that?
Adam Fortuna 13:08
It’s mostly something that project managers would use to schedule out the time of projects.
As you’re talking with your developers and you’re saying, “How much time is it going to take to do this?” normally people aren’t going to say, “It’s going to take four hours.”
They’re going to say, “It’s going to take somewhere between 2-10 hours or 2-20 hours,” but it will probably take somewhere around 10. It’s that same technique, but applying it to FIRE.
Andrew Chen 13:35
That’s pretty clever.
It sounded like you had some stock compensation or stock option windfalls that helped accelerate your retirement date. How did you stay focused on that goal when I imagine many of your colleagues with their own windfalls probably started upgrading their lifestyles, buying homes or cars while you had this FIRE goal?
How did you keep your head on straight and not get distracted by other things?
Adam Fortuna 14:17
I think part of it is that I made a lot of those mistakes really early on, so I wasn’t making them later when I had that money.
For instance, I bought a house in 2006 in Florida right before the housing market crashed. I sold that house 12 years later and it was still down 20% from what I bought it for.
So I had this different outlook on what the value of the home was for me. And since then, I’ve been very much in the apartment-only camp.
Andrew Chen 14:57
Got it. The home you bought in ’06, was that meant to be a primary residence or an investment rental property?
Adam Fortuna 15:03
It was a primary residence. At that time, I was completely unaware of all of the real estate jargon around cap rate and how much could I rent this out if I wanted to compared to how much the mortgage is going to be. Those are things that I would definitely look at now if I was buying a house.
But at the time, I’m like, “This house is pretty and I love it. I’m going to buy it.” It was definitely a costly financial decision.
Andrew Chen 15:31
Gotcha. Cool. During this period in which you were accumulating, saving, investing, and getting your startup windfalls, what proportion of your savings were going into different types of accounts, like tax-deferred, tax-exempt, taxable accounts, as you were accumulating?
And then by the time you retired, what was the proportion in each bucket?
Adam Fortuna 16:00
One of the things that was very fortunate was the startup I was working for, Code School, they paid very fairly for a startup. And then one of the common things is that there’s this tradeoff between low compensation and high equity.
We’re very fortunate that Code School never took funding from anyone. It was 100% owned by the employees and it was still able to pay a decent salary.
Because of that, most of my career, I was still saving somewhere between 20% and 50% of my salary every year, mostly just maxing out 401(k) and Roth IRA, and then putting a little bit into a brokerage account. For the first couple of years, we didn’t even have a 401(k) because it was a startup, so I was just putting a lot of money into a brokerage account.
By the time I left the job after the acquisition, it was in a very unusual state from what I read on most FIRE blogs where probably 85% of my investable cash was in an after-tax brokerage account. Only 15% was in a 401(k) or a Roth.
So all of these techniques, like a Roth IRA ladder or things that you would use to access a 401(k) early, I know to fortunately not look into those too much and just focus on the brokerage account withdrawal side.
Andrew Chen 17:36
It sounds like 85% brokerage, 15% tax-advantaged by the time you retired?
Adam Fortuna 17:47
Andrew Chen 17:48
What were you investing in? Passive index funds, stocks, bonds individually?
Adam Fortuna 17:57
I am very much in the minimal investor account where I keep it as simple as possible. Pretty much everything is in either a VTSAX Total U.S. market, a VTIAX Total International market, or a VBTLX Total Bond market fund.
Everything is that, aside from I put 5% in real estate investment trusts because I don’t own a home, so I’m leaning toward that. I think if I owned a home, I might not do that.
And then I also put 5% of the total portfolio into what I consider speculative investments, pretty much whatever I want. At the moment, that’s still holding some company stock from my past employer.
Andrew Chen 18:49
Is it fair to say that you’re basically constructing a “Boglehead” style three-fund portfolio?
Adam Fortuna 18:57
Yeah, exactly. I’m a big fan of the Bogleheads.
Andrew Chen 19:01
How did you allocate between the three classes?
Adam Fortuna 19:06
Mostly I did about 20% bonds, and then of the remaining, two-thirds U.S., one-third international.
Andrew Chen 19:16
Gotcha. When you finally pulled the trigger, how much did you have saved up?
Adam Fortuna 19:25
The funny story about having a lot of money in a company stock is that number changes drastically. I have a graph of the stock performance for my net worth. The day I gave notice, it’s at its all-time high of about $2.6 million.
And then when I finally left my job three months later, because I ended up giving three months’ notice, it was about $1.8 million.
Andrew Chen 19:57
Wow. That’s a pretty steep drop. Did that cause you to reconsider?
Adam Fortuna 20:03
Luckily, no. I think it probably would have, but I was still in the mindset that “If something goes wrong, I’ll go back to work somewhere else later.”
And luckily, that was right around that time, if you recall at the end of 2018, there was a big stock market decline, and then it quickly rose back up to where it was after that. So within three more months, it was back up to $2.3 million.
Andrew Chen 20:33
I remember that time. Luckily, the recovery came pretty quickly.
When you finally decided to pull the trigger, how did you actually break the news to friends and peers? And what was their reaction?
Adam Fortuna 20:55
One of the funny things is that I blog non-anonymously, so I’m publicly out there. I’ve even given talks to our company, our local team, about how to invest, even some basic numbers, shockingly simple math numbers. People were aware that I was at some point probably going to leave, so it didn’t really come as a shock to anyone.
When I did tell my manager, she was very happy. She’s like, “Are you FIRE-ing?”
I’m like, “Yeah.” She’s like, “That’s awesome.”
It was a very positive environment. And that was one of the reasons why I gave three months’ notice.
Andrew Chen 21:39
That’s pretty fortunate.
Sometimes I know when breaking the news to friends and family, there can be some head-scratching or even pushback. It’s heartening to hear that folks were supportive.
I remember reading your job exit blog post that you wrote about leaving your job. In the post, you mentioned that you read through the Financial Samurai’s book, another personal finance blogger that we both follow. He wrote a book, “How to Engineer Your Layoff,” which is all about how to negotiate a good severance package, etc.
It sounded like that helped you to come up with some ideas about how to have the conversation with your own employer, and that there were some helpful strategies that you had learned on how to balance the negotiation between walking away potentially with some severance and maintaining good relations at your employer.
I was just curious. What were some of the key lessons or takeaways that you learned in the book that helped you prepare your exit conversations with your employer?
Adam Fortuna 22:53
The funny thing is that book is all around how to have those conversations when you leave and how to be prepared and maybe even how to get a little bit more when you leave.
That could be them paying for health insurance for a while. That could be some kind of ongoing consulting fee if you want to come back and help things out for the next couple of months, and a bunch of other techniques. The more I read that book, the more I was clear I just wanted a clean break.
Mostly the thing that stood out was you can either try to optimize for money when you leave or optimize for relationships when you leave. And I decided to optimize for relationships, so I didn’t really end up putting my employer on the line for anything.
I think if I had more of an adversarial relationship with them, I would have. That’s not a dig at anyone who tries for it. I think it’s in people’s best interest to get the most when they leave.
But in my case, I was in a financial position where I didn’t need to.
Andrew Chen 24:13
You mentioned that one of the things that you really looked forward to doing in early retirement was travel a lot.
I was just curious. What are some of the most memorable places that you’ve traveled to since you FIREd? And what made them memorable?
Adam Fortuna 24:32
As you probably know, this year in 2020, travel isn’t quite as big a thing. We had planned almost a month-long trip to Taiwan and South Korea. Luckily, South Korea was one of the very first countries to close their borders, so we were able to get full reimbursement on that trip.
But fortunately in the first year, we were able to do quite a bit. I think this was actually before I left, but we went to Southeast Asia. We went to Vietnam, Laos, and Cambodia for a couple of weeks.
That was an amazing trip that I definitely want to go back. I was just amazed by the culture and the people. I think that would be a fun place to just spend a month to explore Angkor Wat or travel around and eat my way through the whole area.
Andrew Chen 25:30
You mentioned earlier that you got a lot of ideas when you were reading the “Shockingly Simple Math” post on the Mr. Money Mustache blog.
Now in early retirement, I know it hasn’t been too long, but you’ve officially crossed over. What is your approach for determining how much you can afford to withdraw every year so that you feel confident that you’re going to outlast your savings?
Do you do a pretty straightforward application of the 4% rule, or are there any nuances that you apply when determining how much to withdraw for the year?
Adam Fortuna 26:17
Initially, we were planning on just keeping it simple and trying to stay under 4% as a yearly thing. I think that’s still our loose guidance, attempting to keep it closer to 3.5%.
But on a month to month basis, one of the things we do is I just track all of our expenses using Tiller to a Google Sheet. Tiller is really handy.
Andrew Chen 26:47
What is that?
Adam Fortuna 26:48
Tiller is something like Mint or Personal Capital. It connects with all of your different credit cards and that kind of thing.
Tiller is unique in that it pulls all of that data straight into a Google Sheet. That Google Sheet is all of my transactions with another tab for the expenses, and then I add some other tabs that I’ve created that combine things.
One of the things on that sheet is a trailing six-month withdrawal rate and a trailing three-month withdrawal rate. If that ends up going higher than 4%, then I know something is really a problem and I need to double down and see if I can cut some spending.
Andrew Chen 27:38
So it sounds like you have a heuristic of “don’t go over 4%,” but then there’s also an additional approach where you try to actually push it closer to 3.5%. Is that fair to say?
Adam Fortuna 27:54
Right. And looking at it with the last three months as a canary in the coal mine for “Am I on a good pace for the year, or do I need to make some changes?”
Andrew Chen 28:06
A moment ago, we were talking about how 2020 has thrown some plans awry because it’s just harder to travel. Has the coronavirus altered your plans in any way when it comes to FIRE, or pretty much business as usual?
Adam Fortuna 28:23
Pretty much business as usual, certainly in a very fortunate spot for it. We’ve been having weekly chats with a bunch of our friends, and it’s a hard time right now. We’re extremely fortunate to be where we are right now during this time.
I see people having to stress out about jobs and working from home and teaching kids. We’re child-free ourselves, so that’s not a part of what we’re doing. But there’s a lot of things going on right now.
I think for us, my wife and I have just been staying at home with our dog. That’s pretty much been it.
Andrew Chen 29:06
By the way, when you were still in the accumulation phase for planning for FIRE, how did you think about health insurance and healthcare? And what do you do for health insurance right now?
Adam Fortuna 29:22
That was always a big question. We were originally in Florida, so we were shopping around on healthcare.gov to price out how much different insurance plans would be after we both left our jobs.
For the first year that I was not working, my wife was working, so we were able to just use her insurance. And then at the beginning of this year, in January, she left her job, and that was when we made the switch to the healthcare.gov marketplace. That process ended up being really smooth and surprisingly easy for us to get insurance through there.
Now, easy doesn’t mean cheap. It ends up being somewhere between $700 for a bronze plan, which is basically a high deductible plan, up to $2000 or maybe even more for a gold or a platinum plan per month.
Andrew Chen 30:31
Wow. Don’t you get a subsidy given that you’re not working?
Adam Fortuna 30:38
There’s a really good article on this on Root of Good’s blog. It’s all around how much income you’re taking in, and that determines the amount of a rebate.
One of the key points is right around $64,000. If you’re making less than that (that is, the amount you’re filing on your taxes from capital gains, income, dividends), if all of this is under $64,000, you can get about $350 a month rebate.
In this case, that rebate just lowers the price every month. It’s not like a rebate at the end of the year. It’s lowering how much you pay every month. So that lowered our health insurance costs from $700 a month to about $350 a month.
Andrew Chen 31:32
Got it. Which for two people, it’s still fairly reasonable. Hopefully, you don’t have to use it.
When you think about the career, life path of colleagues or classmates or peers who are still working, they still have the comforts of a stable salary notwithstanding everything that’s going on right now, how do you not let what they’re doing, whatever successes they may be having, whatever pretty Instagram lives they may be living, get to your head?
Is that ever something you grapple with post-retirement?
Adam Fortuna 32:19
I think me of 10 years probably would have. One of the things we started doing the last couple of years was I moved from software developer into more management side, spending a lot of time learning more about feelings in general, but a lot of personal work on myself, personal work on how to grow a team.
A lot of that ends up with some of this self-growth around celebrating others’ successes and being more supportive in general. And I think some of those takeaways now are when I see people having that success in their own lives, I’m just so happy for them.
There’s sometimes a point of “Oh, man. That would be fun to try.” Or it has almost an excitement to spur something else for me to try, but I consider that a good takeaway from it rather than a negative one.
Andrew Chen 33:20
By the way, you mentioned that you were in Florida at the time. Were you in Florida when you pulled the trigger and early retired?
Adam Fortuna 33:34
I was out here in Salt Lake. It was about a year after I moved out here.
Andrew Chen 33:40
Was your decision to move out to Salt Lake part of the FIRE plan, or was that decision made for other reasons?
Adam Fortuna 33:49
It was made for other reasons. The company that acquired us offered me to move out here and help pay for all of it, so it ended up being a good time. And my wife’s company was also opening up an office out here, so she was able to move with her job.
It’s funny because if we had stayed in Florida, we probably would have saved $50,000-100,000 in taxes.
Andrew Chen 34:16
Yeah, no state income tax in Florida.
Adam Fortuna 34:19
Yeah. And at the time, we had no idea that the company was going to go public. I think if we had known that, we might have stayed for one more year just to take advantage of those free capital gains on income taxes.
Andrew Chen 34:33
For sure. What adventures on your bucket list are in your future now that you’re early retired, whether it involves traveling or whether it involves pet projects at home, that we should keep tabs on?
Adam Fortuna 34:51
One of the things I’m working on now is really turning Minafi into something like a Code School for learning how to invest for people that are just getting into it, learning how to create their own asset allocation, how to evaluate the funds in their 401(k).
The last couple of days, I’ve been just pulling data from stock market APIs to create a fund directory of mutual funds on Minafi. That’s been a fun side programming project in Ruby.
Andrew Chen 35:30
Is your goal with Minafi to build tools to provide content? Equally both?
What’s the goal?
Adam Fortuna 35:44
The goal is mostly around tools, articles to help people learn how to invest confidently on their own. I think one of the special areas that I enjoy making content for is interactive tools, ones where people can enter in their numbers and the articles change and it gives them feedback on their specific situations.
Andrew Chen 36:10
Adam, this has been a real treat. I’ve enjoyed chatting with you. Where can listeners find out more about you and what you’re up to?
Adam Fortuna 36:18
If you head over to minafi.com, and if you want to check out the interactive guide to FIRE, it’s an article just like I was talking about where you put in your numbers and it gives you your plan forward and timeline of when you could reach financial independence.
Andrew Chen 36:40
Cool. We’ll make sure we link to all that stuff in the show notes.
We’ll also link to the tool that you mentioned. I think it was called Tiller. Folks can check that out.
I look forward to sharing this with our audience. Thanks for taking the time to chat with us today.
Adam Fortuna 36:54
Awesome. Thanks for having me, Andrew.
Andrew Chen 36:55
Cheers. Take care.