Tracy’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 Tracy Ma, one of our readers. Check out Tracy’s plan and tell her what you think.

Tracy’s 7 Phases of Retirement

I have been enjoying all of the articles on Retire By 40 (especially Joe’s 7 phases of retirement) so much that it inspired me to write one myself. Early in life, my husband and I worked hard to discover ourselves and determine our values and goals. We wanted our decision making process to be driven by the bigger picture (our values, beliefs and goals) rather than the money directly in front of us. We wanted OPTIONS and the ability to accomplish our life plan.

We used real estate as an accelerator to plow through our plan. Eight years into it, with ups and downs, we are wiser, wealthier, and still holding onto these properties. The key is to protect yourself with rental income (the “dividend” of your investment) rather than just relying on the value of the real estate. During market corrections, this prevents you from needing to cash out the investments for a long time.

In my 7 Phase retirement plan, I am very happy to say we are our in Phase 5. I am very excited to share my plan and hopefully this will inspire and help you on your journey. So here it is!

Phase 1 –Build a Strong Platform: This is where you build financially healthy habits by slashing debt like a ninja and maintaining discipline. You decide to live under your means and monetize your skills as much as possible.

Right after I graduated from university, I had student debt and I was living in one of the most expensive cities in Canada. Rather than accepting that it would take many years to slash this debt, I decided to be creative and to build multiple streams of income. I found a cheap place to rent and I used my engineering salary to pay for my expenses. The surplus after expenses was invested in whole life insurance and stocks to start a small savings account. I also busted my butt for two years as a tutor and a model to pay off my student debt.

Phase 2 – Grow Your Financial Fortress: Earn more, spend less, and invest like a rock star. When you are young (especially if you don’t have children), this is the time to take the greatest risks because you have time on your hands to handle volatility and recover from bad periods. Invest in securities like stocks, or businesses, or real estate.

I focused on real estate. With a double income and no kids, my husband and I decided to repurpose our incomes. My husband paid for most of life and housing expenses. The majority of my salary went straight into savings, purchasing real estate properties, and renovations. We became landlords by buying a new home and renting out our current home: twice. We also rented out the apartment in our existing home, which paid for our vacations and property taxes.

Phase 3 – Have Your Fortress Start Paying you: Start enjoying the fruits of your labor by using your investment income to accomplish your goals like going back to school, going on a nice vacation, or achieving your dreams. My husband and I achieved a lot with our

investment income. We took part-time university courses, went on several vacations, and when we decided to start a family, we prioritized the rental income to pay for our nanny: a dream come true. We also continued to live below our means (as much as you can with twins) with a large proportion of my salary going straight into buying/renovating properties, and partnering up with family to continue this path.

Phase 4 – Pursue your Passions/Interests: You now have the courage and financial means to change directions in life because of your awesome discipline and habits, if you choose to do so. This phase is where you can make life decisions based solely on interests like deciding to take a sabbatical from work, investing in education, volunteering, embarking on a new direction, or starting a new business. When my kids started school, it freed up our rental income to pay for housing expenses. At the age of 35, I decided to take a year-long sabbatical that I enjoyed so much that I left my engineering job to pursue full-time entrepreneurship based on interests.

Phase 5 – Build Your Safe haven: Protect your investments so you can continue on your new journey forever! Life throws curve balls and if you have children, they can be expensive, so be prepared as best as possible with contingency plans. Continue to live under your means, earn extra side income and use that income to reduce risks to your wealth. For example, you might transfer your investments to safer vehicles, or aggressively pay down mortgages or consolidate your investments to reduce liability. All of my real estate properties have mortgages so we plan on paying them down aggressively, and zeroing out our mortgage. We also plan on diversifying our holdings to include dividend and blue chip stocks. This is where we are right now.

Phase 6 – Reach your Financial Nirvana: This is very, very close to reaching full retirement. This is where all of your life choices are on your own terms because you have enough investment income to live comfortably and cover all of your family needs. To do this, we plan on consolidating our real estate properties to have a few paid out mortgages, which would drive up the cashflow. When our kids are older, I plan on renting out the apartment in our home or move out to convert it to another rental home and downsize to a smaller space. My husband can start a new journey, if he wishes to do so, like starting a new business based on his passion or working as an independent consultant, or taking a long sabbatical. Or we can both not work for periods of time to go on vacation if we choose to do so.

Phase 7 – Reach your Financial Freedom: This is when you decide to stop working for good and enjoy full retirement whether it be volunteering, travelling and/or spending time with family. You can start drawing down from your retirement fund/pension when you choose to do so (or when you’re forced to by the government!)

Some of the steps are purely optional, like phases 4 and 6. It really depends on what your values and goals are in life. Although it is tempting to retire early by selling all of our properties, we have no need to draw on these funds because we want to continue to pursue interest-based work, and to learn and create new things until our bodies cave in and force us to ‘retire’ traditionally in Phase 7. This is not for everyone and it really depends on what you want out of retirement

Tracy Ma is a mother of twins and a real estate investor in Ottawa, Ontario. Connect with her at Financial Nirvana Mama where she shares free tools, videos and articles on managing your real estate portfolio. Her mission is to empower women on investing to reach their financial nirvana.

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

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. 

The following two tabs change content below.
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.
Get update via email:
Sign up to receive new articles via email
We hate spam just as much as you

31 thoughts on “Tracy’s 7 Phases of Retirement”

  1. Joe,

    I really like the posts in 7 Phases of Retirement Series- especially hearing how other people are making it work on their terms… I think the thing I like most is how different everyone’s path is.

    Let us know how we can get involved and create our own 7 phases of retirement-
    I think this topic would be a fun way of making this a regular series. If you are open to having others post- I would love to share some ideas. I’m sure there are plenty of your readers out there that would love to add as well.


  2. I liked your 7 phases! Base on your list we are nearly at Phase 7 – financial independence.

    We have owned rental properties for 3 decades and can probably share some interesting war stories with you about them. We are within 8 months of having the last of that debt paid off. When that happens, we will then have the passive cash income flow we need to retire, without necessarily drawing on any retirement accounts. Hopefully our lifestyle does not begin to inflate with all our free time. ?

    We can’t wait!

    • Bryan,

      That is so AWESOME! I’m very excited for you. Yes I’d love to hear about your war stories. It is very inspiring to hear that you stuck it out for thirty years and massively succeeding from it AND without needing to pull the principle anytime soon.

  3. I like your “grow your financial fortress” tip, specifically routing your paycheck to saving. I tell a lot of my clients at the bank that have a spouse/partner to try “banking a paycheck.” Depending on how the income is earned, can equate to a 50% savings rate which could definitely result in ‘Retired by 40.’ Nice write up, Tracy.

    • Thank you Lucas. I have my parents to thank because I know they were able to raise a family of six plus pay for education costs on a combined income much less than mine. AND retire well and happy after the kids moved out of the house. It is wonderful to hear you are giving out that advice to help jumpstart their own journey.

  4. Tracy,

    Excellent plan! Thanks for sharing your plan to use rentals for your road to FI. We enjoy reading how people reach FI in the 30s and 40s.

    We are 50 and we are late to the FI party. Our parents have rentals and we don’t have the stomach for it. One of my parent’s tenant of 30+ years paid the entire mortage of one house. Some of their other tenants caused a lot of damage or just did not pay rent in the past. We don’t want another job (words from the Dividend Mantra) but we are glad to see that it works for you and many other people.

    We did it with individual 4-5% municipal bonds. Our state is finanically stable so we sleep well at nights. It pays us interest twice a year and we get different bonds to pay on many of the months so that we have income throughout the year. Our money is finally working for us instead of us working for money. We understand that our principle will not appreciate like real estate and that is OK with us. The passive income from the muni bonds is our personal pension plan.

    Although we reached FI last year, we are curently still working. Our company has announced layoffs. We will keep working until we are eliminated in order to receive a severance.

    • Awesome job getting to FI!! Isn’t it nice that you don’t have worry about being laid off:) Sounds like bonds are really working for you at 4-5%, that’s great. Where do you buy these municipal bonds?

      • Thanks! It was scary using our life’s savings to buy muni bonds but it was the only investment vehicle that we are comfortable with. We also do not have the stomach for the stock market. We are extremely relieved that we have passive income to cover expenses during the layoffs. Many of my co-coworkers are not financially ready and are very stressed. This money will help bridge us to 55 when we are able to collect our company pensions. At 59.5, we will be able to withdraw from our 401Ks. Then we collect Social Security at 62.

        In the USA, we personally use Fidelity to buy the muni bonds for our state. We can also use a Financial Advisor at our banks to purchase muni bonds but they are like 2-5% more expensive than the self service Fidelity brokerage firm. We love munis because they are Federal and state tax free in the US. A 4% muni is like a 6% bank CD to us. When will we see a 5% CD again? I bet it will be YEARs…

        I am not sure how you would buy munis in Canada. Check with your brokerage company or banks. You would definitely not buy US munis since the interest is taxable in Canada.

  5. Great post!

    I’ve been deciding whether to invest in real estate rentals. My biggest concern is simply having to go through the hassles of landlording (I probably wouldn’t hire a property manager unless I have multiple units) and the possibility that I’d have to move elsewhere for my primary job within a few years.

    • Smart Money MD
      I understand, landlord is a hassle sometimes. One of the most important aspects of investing in real estate is choosing your tenants wisely. This helps immensely. Also, you can also hire a property manager just for service calls (as and when required services for fixing things/coordinating work). But if you are only staying at one place for a few years, it makes it tough because you need to keep a property for many years to make it worth your time. Have you ever considered just renting out your existing home when you move out?

  6. I bought two rental properties in 2013 to diversify my portfolio and have been pleased so far with the experience. It’s such a nice feeling to get the rent check every month and I would like to buy at least one more property if the opportunity arises.

    • Glad that I can help. Check out my website when you get close to buying a property, I’m sure that one of my articles will be helpful and more importantly, save you time and money:)

  7. I will still be in Phase 2 for a couple of years. I am definitely seeing the benefit of a larger portfolio as it seems to grow faster every day. We are looking into adding some real estate rentals to our portfolio in the next few years.

    Great story, I am always happy to see others achieve FI in their 30’s and 40’s.

  8. I love reading others stories of success like this. It’s refreshing to see others deciding to change their lives and following through. Too much of the news now is about how it’s impossible to make it and how the American Dream is dead. My wife and I work hard and live well below our means – like you we save one person’s income – so that we can afford to have more choices in life. We can choose to work the jobs we want to work, to take time off, etc.

    • Jon, Great to hear you are taking massive action and creating your own options in life on your own terms! It isn’t easy, but it is worth it once you get there.

  9. I am definitely saving this article for our children who have recently graduated from college and high school. We were very financially prudent, saving, investing and able to pay our house off in just ten years. However, we missed the boat on the whole rental property scene. Now, we wish we would have done that. Thus, we are going to encourage both of our children to buy duplexes as their first homes to start their own independent income stream.

  10. Ideally, here are my 7 phases of retirement:

    1. Be retired at 20.
    2. Be retired at 30.
    3. Be retired at 40.
    4. Be retired at 50.
    5. Be retired at 60.
    6. Be retired at 70.
    7. Be retired at 80.

    After that, who cares?

  11. Hi Tracy, Congratulations on your success. I’m curious. I’m not familiar with Ottawa but was wondering how correlated real estate prices over there are with oil prices.

    • Hi Nelson,
      Thank you!
      We are very lucky, Ottawa is protected from the oil prices because the main employment sectors are IT and government which makes it more steady state.
      But I have other properties in oil driven provinces and those are more influenced by the oil prices. I had to reduce rent to more realistic prices in those provinces because of the oil crash but I came out ok still.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.