Can AI Plan Your Retirement Better Than I Can?

Can AI Plan Your Retirement Better Than I Can?

June 30, 2023: In today’s world, artificial intelligence (AI) is a hot topic, with numerous discussions about its impact on various aspects of our lives. From work to healthcare and even the fate of humanity itself, there are many complex questions surrounding AI that can be difficult to answer. While I may not have all the answers, I can shed some light on AI’s potential in a field that I’m familiar with – retirement income planning. This may seem like a narrow focus, but it holds great importance, especially for retired Baby Boomers and those planning for retirement, who make up the most prominent financial demographic in the U.S.

At Go2Income, we embarked on a project to explore AI’s capabilities in retirement income planning. We turned to ChatGPT, a popular AI tool, and posed ten questions about retirement income planning to gauge its effectiveness. Although the results were promising, it’s essential to understand the limitations of AI in this context.

AI proves adept at gathering information about the fundamentals of retirement planning. It can provide valuable insights and even generate a helpful list for further research. However, it needs to improve when providing precise figures or well-reasoned suggestions. The responses tend to be politically correct and generic, needing more depth and specificity for comprehensive retirement planning. Therefore, it’s advisable to verify certain answers with reputable sources and engage in discussions with human experts.

It’s essential to recognize that AI, represented here by chatbots, follows a familiar trajectory of technological advancements. While they represent a significant leap forward, they can’t single-handedly create a new world, just as the first transistor didn’t revolutionize everything on its own. Human intervention remains crucial to harness the full potential of AI and leverage the speed and capabilities of these new “large language models.”

Let’s delve into some of the questions we posed to ChatGPT and highlight its responses:

How do you prepare for retirement if you’re not willing or able to pay for long-term care insurance?

ChatGPT suggests focusing on saving and investing early to build a retirement fund that can cover potential long-term care expenses. Creating a budget that prioritizes retirement savings and accounts for possible healthcare costs in later years is also advised.

What portion of your retirement savings should be in liquid investments like money market funds?

According to ChatGPT, it’s crucial to establish an emergency fund before allocating funds to retirement savings. This fund should typically cover three to six months’ worth of living expenses and be held in highly liquid and easily accessible accounts like regular savings accounts or money market funds. This ensures the availability of a safety net for unexpected expenses or income disruptions.

What should I expect to pay in federal income taxes on my retirement income?

Federal income tax rates are progressive, increasing as your income rises. It’s essential to stay updated on the current tax laws as they can change over time due to legislative modifications. Consulting with a tax professional for personalized advice is recommended.

While these responses provide a starting point, it’s worth noting that the chatbot’s answers omit the favorable taxation of annuity payments and may overlook some essential aspects of retirement planning methods like Go2Income’s approach. Go2Income focuses on income allocation rather than asset allocation, integrates various types of income annuities, employs monitoring and replanning to adapt to market volatility and life events, and suggests investment portfolios aligned with its planning method. These elements go beyond conventional “best practices” and offer a more comprehensive approach to retirement planning.

Although AI has its limitations, there are ways in which we can leverage its power to enhance retirement planning for individuals. By employing AI, we can reduce costs for clients, extend solutions to smaller accounts, provide more customized recommendations, make financial advisers more effective and efficient in refining plans,.


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