The same goes for the inverse. It can be discouraging for kids behind in reading to be assigned content based on their age (or grade) only for it to be far too challenging.
It’s a hard problem though because categorization makes it easy to organize content and find what you’re looking for, but it can also feel like a competition, which is not always helpful.
Each grade level has 4 "levels". But each kid is on their own track. And while those books have assigned grades, the teacher assigns a pool of books for each kid based upon their actual reading level. And each week, the kids are supposed to pick 4 books from their pool to take home and read.
My daughter is in 1st grade and every week picks 4 "R/S" books (3rd grade). She has a friend that still picks books in the "D/E" category (late kindergarten/early 1st grade).
That's similar to what I recall from school myself, 20+ years ago. Iirc ours was based on colours, which was a nice dual because as you got more advanced the colour names themselves progressed from easy primary colours to secondary, tertiary - nicher vocabulary for the colour names before you'd even opened the book.
It’s a hard problem though because categorization makes it easy to organize content and find what you’re looking for, but it can also feel like a competition, which is not always helpful.