This was exactly the process by which mine learned to read. She is 7. She regularly reads books on a 4th-5th grade level (mainly biographies and history) but also reads books on a 1st grade level and enjoys them just as much. When offered those online reading programs, she'll read along with the book while listening to it and has done that on some science books marked for 8th-9th grade, but she would never read those alone. She can't decode and understand them at the same time.

One year ago I had the same concerns as you. She learned to read the same way as yours--not by phonics so much but by just knowing words and deducing the second part of the sentence based on the first one.

So what we were seeing at home was her going in her room and reading Captain Underpants and laughing and spending a lot of time, but then when her kinder teacher told us just to have her check out books her level and fill out a comprehension worksheet afterwards, we had a lot of trouble with her reading those denser text books by herself. She was skipping text and not reading everything correctly. So she wasn't reading correctly enough to really enjoy most books but she wasn't reading incorrectly enough to stop reading.

I think we found that we encouraged her to read the high density text too frequently--we should have pushed her a little but also encouraged her to read books designed for younger kids so she could relax more.

She also needed stronger glasses, and that made a big difference.

Our way to help her with reading has been to encourage her to read below her level, as well as at her real level. This has helped her a lot. She listened to a lot of novels on one of those reading programs, and it was phenomenal for her fluency. I was shocked at how well that worked. She now reads like an actor. I also sometimes read those bios and older kids books with her (not always, but sometimes) because I do find that while she understands a lot, she doesn't understand all of the context. Those things put together have really helped her.

Reading at her school is actually difficult because the material they are reading is so simplistic that it is actually difficult to follow, but really, we don't get involved with reading at school at all, we just support at home.

But I do think it takes a while for them to get comfortable reading dense text, even when they're grade levels above the ability of that dense text and focusing on actively encouraging her to pick picture books out of the library as well as Cam Jansen as well as harder books has really worked out for her.