Tawcan’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 Tawcan who blogs at Tawcan.com. He is in his early 30’s, happily married for 5 years so far, father of a 2.5 year old energetic toddler and a brand new 2 month old baby, he lives in beautiful Vancouver Canada, and writes about his quest for a joyful life and financial independence. Tawcan’s focus is on the balance between achieving financial independence and enjoying the journey untill he and his family gets there. This is because life happens while you are busy planning your future, so it is important to be present in every single moment of our lives.

Tawcan’s 7 Phases of Retirement

7 Phases of retirementEarly retirement is a popular phrase nowadays. More and more people are breaking out from the typical norm of going to school, get good grades, graduate, find a good job, work hard, and retire at 65 or later. Do you really want to wait till you’re 65 years old before you can enjoy the fruits of your labor? Life is too short to be working full time for over 40 years and having to constantly listen to “the boss man.” Isn’t it much better if you can call your own shots and control your own schedule?

This is why early retirement is a big goal for me and my wife. To us, early retirement does not mean sitting on the beach drinking piña colada all day long. Rather, early retirement simply means that we can quit our jobs without having to worry about money. We can decide our own schedules and have the freedom and options to decide what we want to do. Early retirement does not mean that we’ll never work again. Rather than working because we need the money, we’re working because we’re enjoying it and because we are fulfilling our life purpose.

According to our early retirement spreadsheet calculator, we should be able to reach early retirement in about 10 years. Since this is just an estimate and a lot of assumptions were used, we are not too fixated on an exact retirement date. The important thing for us is to focus on the different phases of retirement and get ourselves ready for this eventuality.

Phase 1 – The financial epiphany

The first phase of retirement is having the financial epiphany. Without an epiphany you will just continue the norm and work until you’re 65. My wife (I’ll refer to her as Mrs. T from now on) and I had our financial epiphany in 2011 after reading Secret of Millionaire Mind Set and attending the Millionaire Mind Intensive seminar together. Although both Mrs. T and I were raised in frugal families, we didn’t have the knowledge to wrap everything up. We also had a lot of negative thoughts and conditioning about money that were holding us back. Reading the book and attending the seminar helped the both of us to start talking about money openly and to make sure that we were on the same page about money and household finances.

Having a financial epiphany has helped opening our eyes on the world of early retirement and how that will open many different doors for us.

Phase 2 – Pay yourself first & Live below your means

Having an epiphany is great because it opened our eyes to different possibilities. The second step toward early retirement is to pay yourself first & live below your means.

The idea is simple. When you get a pay check, automatically deduct a certain percentage and put that aside for savings and investing. The rest then goes into your checking account for monthly expenses. Because you’re saving first rather than saving after all the expenses, your savings will grow by a known amount each month.

The next secret is to live below your means. Even though you have $1,500 going into your checking account after paying yourself first, it doesn’t mean you should spend it all. If you only spend $500, that’s another $1,000 you can put aside for saving or investing.

Lucky for us, we’re both pretty frugal because we were raised that way. We have kept our lifestyle relatively modest. We don’t care what others think about us, so we have no need to impress others with expensive things such as cars, houses, brand name clothes, jewelry etc. You’ll find both of us and our kids sporting used clothes and used items on a regular basis.

Phase 3 – Generate passive income streams

While putting money aside each month is great, if you stash the money under your mattress (in the fridge if you’re 50 Cent) or just in the bank in a “high” savings account, your money will never grow to much more than what you put in. You must invest the money and generate multiple passive income streams.

For us, our main passive income stream is dividend income. We have earned over $10,000 in 2015 for doing absolutely nothing thanks to owning dividend paying stocks and index ETFs. In 2016 we are aiming to generate $13,000 in dividend income. This is why each month I provide a dividend update on my blog to track our progress. It’s nice to know that we’re earning money even when we’re changing Baby T2.0’s diapers in the middle of night. J

Another passive income stream that we have is the two cookbooks that we’ve published. It has taken a significant amount of time to get this started but after attending some book fairs, it looks like our cookbooks are finally gaining some attention.

Since the housing market in Vancouver Canada is absolutely nuts right now (houses worth over $1 million are being knocked down to build new houses), we have not looked into rental properties as a possible passive income stream. We can potentially investigate this possibility in the future by looking at rental properties in other Canadian cities, or even purchasing farm lands and renting them out.

My little blog is not getting as much traffic as Joe’s. I started the blog to share my journey and my thoughts. I never thought about making money through my blog but if that does happen one day, that’d certainly be welcomed.

Phase 4 – Self Improvements & Pursue your passions/interests

By now we’ve built multiple passive income streams and these sources are slowly generating more and more passive income for us. Life is good. Now it’s time to shift focus on self-improvements. We as humans are meant to continue learning new knowledge as we age. I’m a true believer that if we’re not busy learning, we’re just busy dying. It’s a great idea to take self-improvement courses or read self-improvement books to learn how to be at peace with yourself or how you could be happy without the need of external stimulus.

It’s also important to pursue your passions and interests. For example, I like to take pictures in my free time. So, it’d be a great time to learn a bit more about photography. Perhaps this hobby of mine could lead to a steady part time job in early retirement. Having a few hobbies in post-retirement is great because they will keep us busy. I believe it’s especially important to be mentally and physically engaged in post-retirement. Sitting on the couch and watching TV all day is not in my post-retirement to-do list, I hope it’s not on yours either.

A strange phenomenon that some couples get themselves into in post-retirement is that they get annoyed with each other very easily. The main cause of this phenomenon is due to the couples doing things together all the time. Their have become even more dependent on each other than before. What they failed to realize is that marriage is an inter-dependent relationship, not a dependent relationship. This is yet another reason why it’s even more important to pursue your own hobbies and interests in post-retirement.

Phase 5 – Retirement Trial Run

Having a trial run to see what retirement might be like is a great idea. I recently took a 2 week parental leave to spend more time with Mrs. T and our two kids, a 2.5 year old and a 1 month old. It was great being able to decide my own schedule during these 2 weeks. I also got to do a lot of things that were not possible during a typical workweek. For example, I cut the lawn on a Tuesday, went Costco shopping when the store was pretty much empty, and went swimming multiple times during the week at non-busy hours. This trial run not only gave me a small taste of what early retirement could be like, it also strengthened my desire to be financially independent earlier. Instead of retiring in 10 years or so, wouldn’t it be great to accelerate our timeline and retire in 6 years before I turn 40?

Having a retirement trial run has allowed Mrs. T and I to become laser focused on our early retirement goals. It also helped us to determine what’s more important in our lives. It is certainly not climbing the corporate ladder and earn more income. What’s more important in our lives is having freedom and more options in life and to spend more time together as a family.

Phase 6 – Financial Independence

When our passive income covers or exceeds our expenses, we’ve reached financial independence. As mentioned, this is the magical milestone we are working hard to achieve in about 10 years. Right now our monthly dividend income covers about 40% of our core expenses, like groceries, insurance, utilities, internet & phone, and household items.

The advantage of dividend income is that through organic dividend growth, our dividend income should continue to increase without needing to invest more money. This means our dividend income will be able to keep up with inflation.

Having passive income covering all core expenses is great but we need some buffers, for example money for vacation and other onetime purchases. We think having about $3,500 dividend income per month will provide sufficient buffers for us to be completely financially independent.

Phase 7 – Your life, your choice

Do we continue to work? That choice is entirely up to us. We are only working because we want to rather than needing the income to pay our bills. Imagine never being stressed about work? How cool would that be?

We can also decide to quit work and travel around the world. Both Mrs. T and I love to travel. One of our goals is to visit all 7 continents. I also would love to visit more countries than my age one of these days (21 countries for me so far, need more work!). Wouldn’t it be great to be able to live in a country for an extended period of time and immerse ourselves in the local culture? Our kids would be able to learn so much more than they could ever learn from reading books alone.

Ultimately, it’s about having control of our lives. It’s about having choices. I always smile whenever I think about phase 7. 🙂

While we can probably achieve financial independence if we sell our house and all of our belongings, this is not what we want right now. We’d rather have a home base that we can come back to after months of traveling. That’s why we’re working hard to establish our passive income streams so we can reach phase 7 of retirement in the near future.

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44 thoughts on “Tawcan’s 7 Phases of Retirement”

  1. Great post Tawcan. Passive income strategy isn’t difficult but many people perceive it that way. There are so many dividend income bloggers including us that showing significant progresses. Hopefully more people read your articles and follow your suit!



  2. Very nice Tawcan.

    For the moment I do not really have much of a plan beyond the continuing to save and build up a passive income stream phase. I do however want it to get to the point of being able to cover many expenses to simply give me the option of ‘retiring’ aka doing what I want.

    Since Vancouver’s real estate is so crazy, why not put a higher allocation into residential/apartment REITs and forget about having to find and take care of tenants?

    • Good point about putting a higher allocation into apartment/residential REITs and forget about having to find and take care of tenants. That’s definitely something we’re looking into. 🙂

  3. RB40,

    I enjoyed this post, dearly. What’s interesting is the transition to self-improvement. You have multiple streams of income and you can then feel more relaxed with how income is covering expenses to focus on: Family, Health, Hobbies, Fun things you have always wanted to experience; new skills, etc.. It’s interesting the journey to get there, but you hope the decisions you make, that the sooner than later – you are there. Thanks for posting RB.


  4. Its all about financial independence. I really think being a wage slave is a creativity killer. How can you be truly free if you are worried about making the next month’s minimum payments? I know someone who retired and is now writing a book! Awesome. I know another person who retired, became a consultant, and then later stopped working. Later on he decided to go back to work in the same industry. Freedom.

    • It’s amazing how many great blog post ideas I got during my recent 2 week parental leave. While it’s true that being a wage slave may hamper your creativity, it’s really how you see things. If you remain positive, you’ll still be creative. 🙂

  5. Great post! Even being at perhaps Stage 3.5, it’s great to see how you are making strides in the move toward FI. I’m about 2/3 of the way through a second degree, and hoping to find enjoyment in this journey. Sure, I can work for another 6 years and then reach FI, but I’d like to have some fun doing it! And if I can find a way to keep earning and enjoying that, I’ll probably keep saving until I reach some sort of luxury FI, because just replacing my current spending would probably entail some frugality fatigue. Thanks for the inspiration!

    • Thanks! That’s a great mindset. The most important thing is to enjoy the journey along the way. We can’t be constantly looking forward to the finish goal.

  6. Hat tip to another Vancouverite!

    The financial epiphany phase kind of resonates with me. The missus were talking about when I (she’s still kind of ho-hum about it all) became obsessed with FIRE and we couldn’t really pinpoint it. The best answer I could come up with is some time when I started to track our finances in detail and saw that we had a not unsubstantial lump sum built up and it was growing fairly quickly. That led me to do some forecasting and come to the realization that this FIRE thing was actually realistic possibility which then got me into reading more and more about personal finance.

  7. Tawcon, thanks for sharing and inspiring us with your retirement plan.

    I love this: ‘Ultimately, it’s about having control of our lives. It’s about having choices. I always smile whenever I think about phase 7.’

    It is commendable that you can taste retirement living in Vancouver, one of the most expensive cities in Canada. I used to live there so I know first hand how expensive it is there.

    Thank you.

  8. Great post and digging the 7 phases. 13K in dividends is awesome. Is some of it in retirement funds or are they all coming from after tax savings? For me a big portion of mine is locked in retirement accounts. Looking to grow the other side of the equation when it comes to dividends.

    • It’s a bit of mix between RRSP, TFSA, and non-registered accounts. We maximize RRSP and TFSA ever year and put whatever left-over money into the non-registered accounts. It’s be great to boost the non-registered accounts so we can avoid touching RRSP in FIRE.

  9. That trial run is key. Not only do you get a feeling of what life could be like, you learn important financial lessons. I think a couple other FI bloggers did something where they attempted to live entirely on passive income while still working, and either found that a) they were close, or b) needed more passive income than they thought they did.

    Great post.

    • We did a trial run a couple of times. I took a 3 months sabbatical when our kid was born. It was really difficult to go back, but I had to work a few more years. It really pushed us to go full speed toward FI.
      I did a 2nd trial run right before I quit. We actually saved all of my paycheck for over a year so by that point, we were reasonably confidence that quitting was okay. The 2nd trial run was just to make sure I could deal with not working mentally.

  10. Nice post Tawcan. We agree with your 7 phases. We’re currently on phase 5. This year we are traveling the world to scout early retirement places abroad. If we don’t find a lower COL place to call home, we may be back in the U.S. at phase 2.

  11. I think you broke tawcan’s website from the increased traffic. It’s usually MMM who does that. Welcome to the big league 🙂

  12. Good luck in achieving your goals. What is your profession, just out of curiosity? It seems many early retirement folks seems to be in the IT profession.

    I envy people who truly seem to enjoy their work and don’t seem to have any desire to just leave their profession. Unfortunately, most of these people seem to be at executive level positions at mid to large companies, which most people will not become.

  13. Regarding passive income streams…

    I would love to see an in-depth discussion of generating passive income via dividend stocks vs. generating passive income via growth stocks.

    What we really care about of course is overall return. If one invests in growth stocks, he can just sell investments periodically to generate “income”. It would be interesting to see a discussion on the benefits of each approach. I’m sure that the benefits will depend to some degree on tax rate and the different tax treatment of dividend income vs capital gains.

    • That’d need to be another post I think. Growth stocks don’t typically pay dividend because companies reinvest the money for growth, so generating passive income via growth stocks most likely require selling of the stocks from capital gain. You’re right that tax rate also comes into play on this one.

    • phr3dly: Taxation is one aspect.
      Dividend investors also talk about being able to sleep at night with the confidence of blue chip stocks (generally) being able to pay a dividend through good times and bad. When you’re young and have an income paying job that may not mean a lot but I suspect when you’re older and not working with a net, it’s valued more.

  14. Nice to see a Canadian FI blogger. I totally agree with your trial run in phase 5 to ensure your goals are realistic and workable. Making the finish line in phase 7 is not easy especially in today’s world and it is important that you put emphasis on managing and maintaining your health. I let my health take a back seat for a number of years being focused mainly on surviving and saving towards FI and I’m now struggling with trying to get it back. Change is never easy but without good health why bother saving all that money!

    • Hi Mike,

      Managing and maintaining your health is definitely very important. After all it’s rather pointless when you have all the time in the world but can’t utilize it because you’re in bed sick. Hope you’re making good progress to stay healthy. 🙂

  15. Hey Tawcan, enjoyed the post and great to see the progress the RB40 family has made. Phase 2, 3 and 4 are key, and just rinse and repeat. If we could all just embrace those three phases as a foundation, the world would be a financially healthier place. Hope all is well.

    Dr. J

  16. Nice work Tawcan!

    Building passive income streams is something we need to get moving on – I feel like we are behind on that phase and without having some I don’t know if I will ever be comfortable enough to retire

  17. Well said, Tawcan. I think all of us aspiring early retirees can relate to each of the steps.

    If I could add one step, it would be towards the end. I would call it The Doubt. When nobody around you has similar ideas or plans, your own plan seems surreal. It’s particularly true if you are not open about your plan with your friends and coworkers. I understand the math, and I know I’m taking the right Steps, but bucking convention can feel a bit uneasy.


    • Hi Physician on FIRE,

      Good point on The Doubt. Luckily, since my dad and cousin are early retirees themselves, the concept of early retirement is not a uncommon concept in my family. 🙂

      • That’s awesome that you have family members that are early retirees! It must make early retirement even more desirable to have family that will have free time to enjoy with you.

        Like PoF, we struggle with “The Doubt” because ER is unheard of among our friends and families.

  18. Work is infinitely more enjoyable when you don’t have to work. It is amazing to have the option to just “see ya later” if you aren’t feeling it.

    Just remember never to quit when you leave. Get laid off and negotiate a severance!


    • Hi Sam,

      That’s totally true. A lot of my co-workers talk about winning the lottery and just give the FU notice. But I think it’s way more empowering to be able to walk away without winning the lottery. Totally need to get your book when I’m at the quiting stage. 🙂

    • Hi The Green Swan,

      Thanks, we’re working on creating more income streams. Rental properties is an interesting option but like mentioned in the article, we’re unsure that’s the right option in Vancouver. Perhaps somewhere else other than Vancouver.

  19. Great post Tawcan. As you said, early retirement is what you want it to be. It doesn’t have to be the “normal” retirement of golfing and sitting around. I have loved following your journey so far and looking forward to continuing in the future. Hope all is well at home with the family and Baby T!


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