Bryan’s 7 Phases of Retirement

I wrote The 7 Phases of Retirement in 2013 and encouraged readers to submit their plans. You need a road map to find your way to early retirement because you probably won’t get there by accident. Today’s post is from Bryan @ Just One More Year. Check out Bryan’s plan and tell him what you think.

Bryan’s 7 Phases of Retirement

Let’s talk about retirement—the ultimate goal for the personal finance crowd, the crowning achievement in the 7th phase of the “Retire by 40” list. Nearly everyone desires to and will retire at some point. Or did I mean will expire? My plan is to retire while I am young, energetic, and most importantly, alive!

Bryan's 7 Phases of Retirement

The seven phases to achieve retirement are steps and habits we have formed in our own financial journey. Beginning these phases early will lead to the best results.

Going through the phases is a necessary process we should embrace. For most of us, we should not attempt to take shortcuts. Skipping some of the steps is like leaving out a crucial ingredient when baking a cake. Sure, it may look fine; however the results may be disastrous, leaving an awful taste in your mouth.

My 7 phases toward retirement, with a couple minor detours and resets

Phase 1. Wake up and smell the coffee.

Now is the time to start budgeting and setting financial goals, controlling expenses, and automating your savings. You will also need to do some “adult activities” like building an emergency fund, having proper insurance coverage, creating a will, loading up retirement accounts, and saving for college if you have children. All of this takes thought, research, and motivation. Lesson learned: You don’t want to skip Phase 1.

The phases are like emotional maturity stages that we all will (or at least, should) go through in life. For me, it really hit home once my first daughter was born. I realized that I should no longer act like a kid—because I just had one. I was in the parent role, responsible for so many things, including demonstrating financial intelligence so that I could be a responsible dad.

Phase 1 is the time to evaluate your expenses and budget each and every month. I found very quickly that I could actually adapt to a new level of spending once the important items such as saving for retirement were taken care of first. In this phase, it is time to automate your savings and budget with what is left over, not the other way around. If the ends don’t meet, something in the middle needs to be cut. You must carefully scrutinize your expenses and save the difference.

Phase 2. Create a passive income stream.

Once you realize that you are going to have a long career, “working for the man” for forty years or more, you know there has to be a better way. There is: take on a second job, create a passive income, and invest your savings. Work like crazy and build your business or investment portfolio.

In our case, we bought rental properties that we actively managed and maintained for many years. Now a property manager and vendors manage those duties for us. We also saved through employer-sponsored retirement accounts by investing in stocks, bonds, and index funds. When we left our employers, we rolled those into our own controlled accounts, never considering cashing out and the resulting requirement to pay taxes and penalties to the IRS.

During my Phase 2, I was laid off a few times and realized I needed to re-evaluate Phase 1 by creating a larger emergency fund and getting very serious about investing a higher percentage of our income. Unfortunately, it was also time to experience getting divorced, paying child support, and going directly back to Phase 1. Life is certainly full of learning experiences.

Phase 3. Understanding your future costs.

How many refrigerators, stoves, furnaces, AC units, kitchens and cars will you maintain or replace during a 30- to 50-year retirement? How about creating a bucket list for travel, purchases, and once-in-a-lifetime experiences?

The totality of this idea did not register for me until this year. After all my planning, I had not considered the extent of future replacements. Of course, we will try to get the most mileage possible out of our belongings, repairing them when we can, but these are costs that cannot be ignored.

Additionally we have found that our travel has become more expensive and frequent than we had expected. Another revisit to Phase 1, since somehow we ratcheted up our lifestyle as our incomes blossomed from when we started working. Time to get back into control of our budget!

Phase 4. Test-drive living on less income.

Based on your budgeting, in this phase you should know your lifestyle costs. You’ll have many years of practice creating budgets and measuring their results. You’ll know how many emergencies to anticipate and will have learned how to save. This might be an excellent time for you or your spouse to stop working and test-drive retirement.

In our case, we have funneled all of Dianne’s income straight into our debt snowball. In addition, our budgets for the past two years have been based on a greatly reduced passive income projection. If we can live on that, we can live through all the peaks and valleys that will certainly affect real estate and stock values in the years ahead.

Phase 5. Debt freedom.

Unless you are unique in today’s go-go, consumer-driven, rocket-fueled culture, and immune to a barrage of marketing messages, you probably went into debt at some point. It starts out seemingly harmless enough, with one credit card, and then a week later you have six. The credit cards multiply like rabbits! Next there are two car payments, student loans, 90 or 365 day same-as-cash purchases, and a brand new mortgage. How the heck did that happen?

Now it is time to reverse the trend. Let me share with you: it will not be as fun as when you were in acquisition mode. 🙁 Not only do you need to stop buying stuff, but also you have to begin paying off the meals and memories that are long gone. This is a wakeup call. Please go back to Phase 1 to get realistic with your spending.

We found ourselves $1.5M in debt between our real estate investments, a car, and our home. That was the start of our epic eight-year “debt-ectomy” snowball that piled every available extra dollar, along with newly paid off loans, toward the debt mountain. We have made tremendous progress and have also been very discouraged on countless occasions; however as of August 2015 we are down to $59,555.55 for our rentals. With a bonus from my work, our debt freedom will be achieved in March 2016. And we paid our home off in March 2015.

Phase 6. Financial independence.

This is where we can financially support ourselves for the rest of our lives based on a budgeted lifestyle. We have actually reached this phase. Our passive income can support us with a couple small lifestyle adjustments. When we become debt free in 2015, our plan is to do a victory lap by throwing all our W-2 income into savings from that day to the end of the year.

Phase 7. Retire.

This is the endgame to the years of struggle, the point where we no longer choose to work only for the sake of money. BTW, in our version we are still alive. 🙂

We choose to pursue our own interests without the need for jobs. This is that magical enlightened state that keeps me reading excellent blogs like Joe’s, vicariously living through his experiences. I consume these articles like oxygen, food, and water. Why can’t I be there now? More importantly, will I be able to actually leave my employer?

We will be at Phase 7 sometime next year and we can’t wait to see if and when we make the leap!

Lessons learned

I have made plenty of mistakes and missteps in my lifetime, some of them rather impressive. I don’t want to start reflecting too much on that rocky road. However, I do keep pulling myself back up, then I wipe off the dust and chalk it up to experience. Needless to say, I am very experienced now due to my slow learning and stubbornness. But I digress.

Thanks for reading and learning about our seven phases!

Bryan has been building his passive income since his late teen. He already achieved financial independence and he wants to work just one more year . You can connect with Bryan at Just One More Year where he shares some of the challenges that they have faced in pursuing financial independence. Thank you Bryan for sharing your experience with us.

Joe’s 7 Phases of Retirement

Passive Income Earner’s 7 Phases of Retirement

Rich’s 7 Phases of Retirement

Ben’s 7 Phases of Retirement

Tracy’s 7 Phases of Retirement

I would love to read about your 7 phases of retirement. Write them up and send it to me for publication. I promise it will be helpful to you and to other readers as well. 

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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8 thoughts on “Bryan’s 7 Phases of Retirement”

  1. Joe,
    Thank you for allowing me to share our 7 Phases of Retirement progress with your reading audience. I truly enjoy the topics and community feedback you receive from your articles.

    Paying off our debt and working toward debt freedom has been such a large part of our financial plan the last 10 years. It is difficult to think of doing anything different. We are now so very close to realizing our goal.

    However, I have noticed the trend today seems to be entering retirement with some remaining debt. That may make sense for some people if they have the cash flow to manage those obligations. For us, we want to be debt free in retirement. 🙂

  2. Thank you for sharing your experience with us. I agree that paying off debt before retirement is the best way to go. It may not be optimal financially, but you will have the peace of mind. That’s what we need most in retirement.
    Good luck in this final year. 🙂

  3. Dear Bryan,

    Excellent summary of the different phases of FI life, from them, I will really look into is the phase 4, it’s probably the one that we (FI seeker) miss to evaluate deeply and carefully.



    • Na, wie geht’s RA50?

      Thanks for commenting on our 7 Phases story and progress. I am agreement with you that Phase 4 is especially important when you are a two-income family. I see you are living in Switzerland and are both near 40. I am curious, do you both work now?

      We have been living off my income for the last couple of years. This is proving out the theory to determine if Dianne could stop her work to pursue her cello music. This year with paying off our home, we can now live off her income alone. Next year we should be in a position that our passive income can support our expenses.

      I wish you success with your dream to retire by to 50!

  4. Tracy,

    I really enjoyed your Retire by 40 guest post discussing your 7 Phases of Retirement. I see you and your husband are doing great balancing family life, work, and real estate investing.

    We have been working with rental properties for three decades now and had our share of success and some failure. In hindsight, I would have made a couple decisions differently, based on learning some lessons from our mistakes. Overall, we are very pleased we invested in rental real estate.

    We are almost at the end of our journey paying off the remaining property mortgage. I cannot wait to be fully debt free! ?

    Take care,


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