Hey everyone! I hope you finished your 2025 taxes because October 15th is right around the corner.

This year, I put off finishing our taxes until the very last moment. Everything was mostly done back in April, but I had to wait on a few K1s. I filed an extension and ignored it until I got back from visiting my dad in Thailand. Right after I returned, our tenant moved out, and I’ve been up to my elbows in paint, repairs, and scheduling contractors. Currently, I’m pulling up old carpet and refinishing the stairs. This will save me around $1,500. Home improvement is ridiculously expensive these days.

Anyway, I finally wrapped up our taxes last week and sent them off. With that off my plate, it’s time to tackle my next big financial project: figuring out our Roth conversion strategy for 2026.

This is Mrs. RB40’s first full year of retirement, which means our household income is significantly lower than in previous years. This is a good opportunity to shift money from our Traditional IRA into a Roth IRA while we’re sitting in a lower tax bracket. The bottom line is this will help lower our taxes in the future.

Why Bother with a Roth Conversion?

• Tax-Free Growth & Withdrawals: Once money is inside a Roth account, investment earnings grow tax-free, and qualified withdrawals down the road are also completely tax-free.
• No Required Minimum Distributions (RMDs): Roth IRAs do not require original owners to take lifetime RMDs. This will help the account compound longer.
• Estate planning: If my son inherits our Roth IRA, he won’t have to pay any tax on the account.

Our Traditional IRA is substantially larger than our Roth IRA. That’s pretty standard for my generation because we could contribute much more to our 401k than Roth accounts over the last 30 years.

The main problem with a large Traditional IRA is RMDs down the road. If our Traditional IRA keeps growing at a healthy rate, it’ll be quite large by the time we turn 75. We’ll be pushed into a higher tax bracket by RMDs. I know, I know… This is a first-world problem. But why not optimize our taxes with a little planning?

I’m 53 this year. With our lower earned income, we have a window of opportunity to move some money into our Roth IRA. You don’t have to pay the 10% early withdrawal penalty when you do a Roth conversion, making it a great chance to draw down our Traditional IRA a little bit.

How Much Should We Convert in 2026?

I tried using the tax software to model our conversion limits, but it was pretty clunky. This kind of task is where our AI overlord can shine. I surrendered to the inevitability and asked Gemini for some assistance.

Here is our estimated income for 2026:

• Mrs. RB40’s pension and back pay: $42,000. She had some vacation payout from the previous year.
• Blog and side hustle: $1,000. Blogging income has disappeared and I haven’t done much side hustle this year.
• Rental income: We had some rental revenue, but it’ll be negative overall because we spent a lot of money fixing up the unit.
• Capital gains: $40,000. I sold some stocks earlier this year to pad our short-term spending account. Now that Mrs. RB40 is retired, we want a bigger cash buffer.
• Dividends: $20,000.

I gave this information to Gemini and it told me that we should convert $28,100. This will minimize our taxes for 2026.

The 2026 Tax Math:

If we convert $28,100, we will pay $4,172 in federal taxes. That breaks down as $1,080 in tax on our ordinary income and $3,092 on the Roth conversion.

The best part? Our $60,000 in capital gains and dividends will remain tax-free because our total taxable income will sit right at the upper limit of the 0% capital gains tax bracket ($98,900 for married filing jointly).

If we convert more than $28,100, we’ll trigger a 15% tax on those capital gains and dividends. That creates an effective marginal tax rate of 27% (12% ordinary + 15% capital gains push) on every extra dollar converted.

Anyway, I wrote this post to help Mrs. RB40 understand why we should do a Roth IRA conversion. I tried to explain Roth conversion to her when we walked to the library, but she wanted to change the subject. I guess tax is a pretty boring subject unless you love sticking it to the government. We’ll pay some taxes now at a lower rate so we aren’t forced into higher tax brackets in 2048. Yes, it’s a snoozer, but I think it’s pretty important.

Looking Ahead: 2027 to 2032

Next year, our ordinary income will drop significantly. Mrs. RB40’s pension will settle around $25,000. My earned income will probably be a big fat zero. I don’t plan to sell stocks next year so we shouldn’t have any capital gains.

Without capital gains or back pay stacking on top, 2027 becomes a prime conversion year. We will be able to convert around $90,000 and pay an effective tax rate of just 10.3%. This is our prime window to pay less tax, reduce future RMDs, and give our Roth IRA a longer time to compound.

2033 to 2048: The Long-Term Plan

I’ll turn 59 ½ in 2033. Running the numbers with Gemini showed that we could still run into trouble with RMDs if we only convert up to the top of the 12% tax bracket. From ages 60 to 75, we should withdraw more and go deep into the 22% tax bracket (~$218,000/year) to shrink our Traditional IRA balance.

I’m totally okay with that! We can spend more and live it up a bit, or put the extra money into our taxable brokerage account. A taxable brokerage account is actually better than a Traditional IRA for inheritance anyway. The cost basis gets reset to fair market value on the original owner’s date of death, wiping out accrued capital gains for our son.

California Dreaming (State Tax Bonus)

One extra lesson I got from Gemini was about state taxes. At our projected income level, we’ll actually pay less state income tax if we live in California. Oregon’s tax brackets jump rapidly to 8.75% at just ~$27,000 of joint income. California’s tax structure is much more progressive across the lower brackets.

• OR estimated tax liability in 2026: ~$9,433
• CA estimated tax liability in 2026: ~$4,037

That’s good to know because we plan to move to California after RB40Jr. finishes high school in 2029. Mrs. RB40’s parent are in California and they need a lot more help these days. She has been flying back and forth frequently.

Alright, that’s enough tax talk for today. I applaud you if you got this far! I’m pretty sure Mrs. RB40 tuned out before the end of this post. I suppose she can hire a tax planner if she really needs one.

Have you done any Roth conversions in early retirement? Am I missing anything?

The post Making Our First Roth Conversion appeared first on Retire by 40.

In 1996, I graduated from UCSB and moved up to Portland to start a job at Intel. It was a golden era for us (me and Intel). The internet was ramping up, and it was a great time to be a young engineer. All my college friends were able to secure jobs relatively easily. Ahh, what I would give to be 22 again! Life was so much fun when I was young.

It’s a very different story in the age of AI. The job market for recent college grads seems much tighter and more competitive than ever. My son doesn’t even want to study Computer Science because he heard it’s so difficult to get an entry-level position.

The cost of living is also far higher today than it was in 1996. My first apartment cost just $550 a month. I could comfortably afford a one-bedroom apartment on my RCG salary. Even so, because I grew up without much money, I remained frugal. I lived alone for only one year before taking on roommates again to save money.

Today, I’m sharing our 30-year house hacking journey because it is officially coming to an end. Here’s how life changed over three decades.

The Timeline

• 1996: I signed a lease and lived by myself for a year in Beaverton, close to the Intel campus. After sharing a bedroom throughout college to save money, I was tired of roommates and wanted more privacy.
• 1997: Suburban life turned out to be extremely boring for my younger self. I made a lot of friends and decided to move into a two-bedroom apartment in NW Portland with a roommate. That neighborhood was awesome back in the 90s. It was packed with great eateries and cool shops. We lived in an ideal spot to meet up with friends before hitting town on the weekends.

My old apartment building, The Envoy. I think we paid $850 for a 2-bedroom apartment, $425 each. I loved it. Our apartment had hardwood floors, old-timey central boiler radiators (free heat in the winter), and a little office. In retrospect, we should have taken the 3-bedroom penthouse and gotten another roommate. That would have been amazing.

• 1999: After college, Mrs. RB40 joined the Peace Corps and went to Uzbekistan for almost three years. When she returned, she visited me in Portland, and we decided to get back together. We moved into a one-bedroom apartment downtown and got married shortly after. All my friends thought I got her pregnant, but that wasn’t it. We just decided we were better off together.
• 2000: We purchased a 3-bed/2-bath house in Hillsboro to be closer to my work. I figured my bachelor days were over, so I might as well have a shorter commute. The master suite was on the first floor, and there were two bedrooms upstairs. I rented out a bedroom to friends and other new grads while we lived there. Those Intel employees were always at work. It was a pretty good arrangement.

Our old house in Hillsboro. It was way too big for just 2 people.

• 2008: Again, we got tired of the suburbs. We moved to a 2-bed/2-bath condo downtown near Portland State University. Mrs. RB40 went back to get her master’s degree and landed an internship across the river near the Convention Center. My commute got longer, but it made her daily life much easier. We rented out the Hillsboro house.

Our old condo had an awesome view of the Willamette River and Mount Hood.

• 2014: I retired from my engineering career in 2012. After that, it became very annoying to drive to Hillsboro whenever our tenant had an issue. When the tenants moved out, I sold the house and used a 1031 exchange to buy a duplex in my favorite neighborhood, NW Portland.
• 2019: We moved into a unit in the duplex when a tenant left. We wanted a yard for RB40Jr (who was an active 8-year-old), and the area was far more interesting than downtown. The timing was fortunate. A backyard and walkable neighborhood made the extended COVID lockdowns much more bearable. I figured we could take over both units when RB40Jr got older. Our unit only had one bathroom, and RB40Jr slept in the den. It was fine when he was young, but we would need more room when he got older.
• 2026: Our last tenant moved out just in time. RB40Jr is now a 15-year-old teenager who needs more privacy. We also desperately need a second bathroom. Taking over the upstairs unit will double our housing expenses, but we can afford it. We already saved a ton of money over the last 15 years by living in a smaller space. Most families upgrade to a bigger home as soon as a child comes into the picture. The upstairs unit needs a lot of updating, though. Our tenant was there for almost 20 years. It needs new paint, carpet, light switches, power sockets, refrigerator, cabinets, heater, and pretty much everything else.

• 2029: Once RB40Jr leaves for college, we plan to sell the duplex and split our time between California and Thailand. Earlier this year, Mrs. RB40 moved her dad into assisted living and took over his house. These days, she spends a lot of time in CA to help her parents out. As for me, I plan to spend half my time in Thailand. I have a condo in Chiang Mai and a small beach house in Bang Saen. My dad will be 85 by then, and he’ll probably need more help. Hopefully, he can stay healthy and strong for a while.

Wrapping Up

Alright, that’s a wrap for our house hacking journey. We were fortunate to buy into the market when housing was far more affordable, which let us build stability through room rentals and duplexes. That was a good hack. It was also a good idea to stay in a smaller space while our son was young. Mrs. RB40 complained quite a bit, but we made it through. Now, we can finally spread out and enjoy the extra personal space.

What about you? House hacking is much more common these days because housing is so expensive. Are you living creatively?

The post Wrapping Up Our House Hacking Journey appeared first on Retire by 40.

Hey Everyone! I’m back from my summer vacation. My brothers and I went to visit my dad in Thailand. He had radiation treatment for prostate cancer earlier this year. He seemed much weaker physically after the treatment and we wanted to check on him. Fortunately, the treatment was highly successful and his PSA is much lower now. The doctor said he should be fine for a long time.

We also took this chance to visit my aunt in Australia. The flight from Thailand was super cheap on VietJet Airlines. I paid $212 for a one-way ticket from Bangkok to Sydney, with a stopover in Ho Chi Minh City. Maybe it was low season because it was winter in Australia when we visited. The flight was not enjoyable, though. VietJet gave the passengers absolutely nothing for free. No pillow, blanket, drinks, or food service. You have to pay for anything extra. The plane was a “classic” Boeing and had no entertainment screen or charger plugs. They allowed 15 pounds of carryon luggage. You could pay for more additional carryon and/or check in luggage. It was a long no-frill flight. Fortunately, I was able to sleep most of the way and listened to NPR podcasts the rest of the time. I probably shouldn’t be cheap on these long flights. The flight from Ho Chi Minh City to Sydney took 8 and a half hour.

Mrs. RB40 and RB40Jr flew from Portland to meet us in Sydney. They flew Air Canada and had a comfortable experience. Air Canada is a good carrier with newer planes, but they recently got rid of their free luggage check in policy for international flights. Now, they charge $75 to check a bag. The segment from Vancouver, BC to Sydney took 15 hours. That was a very long flight. Mrs. RB40 said she doesn’t want to do that again. Next time, we’ll stop in Fiji for a few days or something like that. These long haul flights are getting tougher as we get older.

*Blogging update

I did not log on to Retire by 40 at all during my vacation. It was awesome to get away completely. I also neglected my business email and missed the renewal notice from Siteground. I had the site set on auto renewal and it renewed for 2 years. Haha… I guess I’ll keep blogging for at least 2 more years. Although, I feel better about blogging after 6 weeks off. It feels good to write again. Thank you for your encouragement in my previous blog post – The FIRE is Gone. I really appreciate it.

Thailand 2026

I plan to spend half the year in Thailand after RB40Jr goes off to college. The cost of living there is much lower than in Portland and I’d like to be closer to my dad. He is pretty healthy now, but he is 81 years old. He probably would need more help in a few years.

On this trip, we spent most of our time in Bangkok. Things are cheaper, but inflation did its magic. Bangkok isn’t as cheap as it used to be. Here are some examples.

Food in Bangkok

A meal at a midrange restaurant cost around $10. I had a BBQ pork plate, fish maw and crab soup, and a lime ice tea. It was a good amount of food for $10. This would cost $40+ in Portland. However, I feel like food was cheaper in Bangkok 5 years ago. You could still eat street food or grab a boxed lunch for around $2. My dad complained the whole time we were in Bangkok. He said everything was much cheaper in Chiangmai.

A pork katsu sando, a drink, and a very nice view for about $10. This was at MAMAFU, a small rooftop food station at the new Dusit Central Park.

This was at a chain restaurant called Have a Zeed. I had basil fried rice topped with grilled picanha and an egg. The drink was a lemongrass and pandan leaves concoction. This meal cost around $10 as well.

Thai desert for about $1. This was at the Terminal 21 mall’s food court.

Clothes

I picked up a few shorts, pants, and t-shirts in Bangkok. Most clothes at Uniqlo and Muji (Japanese chain stores) cost about half the price of the U.S. stores. A good t-shirt cost about $7-$10 each from a local store.

Prescription glasses

I decided to splurge a bit on this trip and purchased this progressive glasses from OWNDAY, a Japanese Chain. It cost about $400. This was about half of what Mrs. RB40 paid for her last progressive glasses. My dad said you could get much cheaper glasses, but I’m pretty happy with it.

Entertainment

I paid $30 to for a general admission ticket to see the ONE Championship fight at Lumphini Boxing Stadium. It was so much fun. I had to get there about an hour early to secure a nice spot, but it was worth the wait. The general admission got me a seat at the concrete bleacher. You can see the general seating behind the stage in the picture above. I was in the 7^th row and I could see all the action clearly. The concrete bleacher was fine because I was alone. If Mrs. RB40 was with me, I’d pay more (2x-3x) for assigned and more comfortable seating. The live bouts were so much more fun than watching on TV. The audience really got into it and my adrenalin was pumping. My dad said I was crazy to pay that much to see Muay Thai, but it was great because I knew many of these fighters. I would go again if I’m in town for a match.  

This picture is an official photo from ONE FC. They didn’t want the audience to take photo or video. The security guards kept scolding people, but they didn’t kick anyone out.

Transportation

Public transportation was pretty cheap. A ride on the public boats, buses, and light rails cost about $1 to $2 each trip. Taxi from the airport to the city center cost about $10-$20, depending on the traffic.

Haircut

I got a haircut for $7 at Easy Cut, an affordable chain salon. Generally, men’s hair cut cost around $5 to $10.

All in all, Bangkok is cheaper than the US, but it isn’t a bargain that it used to be. Chiangmai should be cheaper, though. That’s where I plan to live anyway. Bangkok is way too hectic for me.

Australia

We visited Sydney, Cairns, and Melbourne. It was great. Australia cities seem much better managed than U.S. cities. They are cleaner and seem chaotic than here. Public transportation is much better too. We really enjoyed visiting and we will encourage RB40Jr to apply to some universities in Melbourne. My aunt invited us to stay with her for as long as we want to. Mrs. RB40 and I plan to go back for a long visit in a few years.

The cost of living in Australia seems to be on par with the U.S. Although, eating out was a bit cheaper because they didn’t have to worry about tipping.

Alright, that’s it for today. I had a nice long vacation and will need to adjust to being back home in Portland. Thanks for reading! I hope you had a great summer as well.

The post Summer Vacation 2026 appeared first on Retire by 40.