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Opinion: Can I afford to retire? Not before you know the answer to this big question

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Pre-retirees want to talk investment returns and review how much they have saved as they debate just how soon they can retire.

Few of them (or their advisers) actually know how much they spend. A spending conversation is not as sexy as one about the stock market. Yet, as I have told many clients, knowing your spending is the secret ingredient that will carry you happily through retirement for decades.

Here is a simple six-step process to figure out roughly what you spend now, how much income you need in retirement and whether you need to save more now so you can maintain your lifestyle.

If you are 10 years from retirement, you can use your current spending less the large savings you accumulate as your starting point.

Those more than 10 years from retirement need to be saving as much as they can, focusing on their asset and investment growth

1. Pull out your federal tax return. Look for the line described as “adjusted gross income” (line 11 in 2020 and line 8b in 2019, for example). It includes your salary (less any 401(k) contributions) as well as dividends, capital gains, alimony, and other income sources.

The rule of thumb is that you will spend 60% to 90% of your current income in retirement.

2. Now find the amount you paid in federal taxes, labeled “total tax” on your federal return. Do the same for the state and find the total tax. Deduct those amounts from your income.

You still will be paying taxes in retirement, but typically not as much. By calculating an amount you spend after taxes, we are focusing on the expenses you can control and change. Federal and state tax laws change, plus you may leave the state you are living in.

Now you know how much money you have available to spend every year after taxes. But we are not done.

3. You may be putting some of that money aside for retirement, a child’s college fund or for a special large expense, such as a once-in-a-lifetime trip, an anniversary party or a child’s wedding. You may also be repaying student loans. Subtract any of those expenses that you do not expect to have once you are retired, reducing the annual amount you will need in retirement.

4. If you own a home and intend to have your mortgage paid off by retirement, subtract that monthly amount times 12 from your ongoing number. If that payment includes your real estate taxes, add back those taxes.

Read: Should I refinance my mortgage? Here’s how to decide

What is the dollar amount you are left with?

This number is the starting point of understanding how much you spend and estimating what you will spend annually in retirement. This post-tax number will be your initial guide to view your retirement assets and how long they will sustain you.

5. Now you can look at the income side by looking up your Social Security estimate by going to your personal account on SocialSecurity.gov. Verify the information on your income is correct. It will show you how much you can expect to collect when you stop working (anywhere from 62 to 70) and claim your benefits. In general, it is best to wait until 70 or at least the latest date possible. You get to make the choice.

Read: Confused about Social Security — including spousal benefits, claiming strategies and how death and divorce affect your monthly income?

Deduct your estimated annual Social Security income as well as any income you expect from a defined-benefit pension plan and/or annuity.

Read: 37 states don’t tax your Social Security benefits — make that 38 in 2022

6. What’s left is the ballpark figure of any income you still need to match today’s spending in retirement. Now you can look at whether what you’ve saved in your 401(k) or similar retirement plan is enough to cover the difference for the rest of your life. Talk to the financial firm handling your 401(k) plan for help in estimating how much you can collect annually or use an outside calculator like this one.

When you get closer to retirement, you may fine-tune the number based on more specific information about where you will live, exact costs of health insurance or other factors. For example, you may have a better idea of the state you will live in and your income. Then, you can add to your expenses a realistic estimate of your income taxes.

Read: There is more to picking a place to retire than low taxes — avoid these 5 expensive mistakes

For example, if you have $500,000 saved in retirement today and you want to retire next year at age 67, knowing you spend $20,000 a year beyond your Social Security income means you could retire comfortably according to the 4% rule. If you spend $50,000 plus your future Social Security income, you must either work several more years to have a sustainable retirement or reduce your spending.

Read: What’s a Roth 401(k)? Does the 4% rule work? Can I buy a home right before retirement? MarketWatch answers your questions

Your spending habits are crucial to your overall goal of retiring comfortably with income to cover your expenses. They have the biggest impact on what you will be spending in retirement. The less you are spending, the more you can save. Redo this exercise every year to discover your expenses after taxes. As much as we like to say our spending is consistent, it is not. Or while many folks say, “we do not spend much,” most people are surprised when they see the number in black and white.

Retirement, like the rest of life, has no guarantees. But by following this approach, you will be heading into retirement with less stress and uncertainty. You may even put yourself on track able to retire sooner than you thought.

CD Moriarty is a Certified Financial Planner, a columnist for MarketWatch and a personal-finance speaker. She blogs at MoneyPeace. Email your questions to MsMoneyPeaceQuestions@MoneyPeace.com

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Barron’s: There Are 4 Types of Spenders in Retirement, and ‘the 4% Rule’ Doesn’t Factor In Habit Changes

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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