Can AI Plan Your Retirement Better Than I Can?

A robot hand and human hand touch fingertips of their index fingers. — (Image credit: Getty Images)

We are inundated with articles about AI on television, in print and online. Will it impact your work, improve medical outcomes or be the end of humankind? All difficult questions and probably above my pay grade.

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So let me address AI’s potential in a field I know a little about — creating a plan for retirement income. Maybe it’s small potatoes and focused only on a narrow group of individuals. However, for that group, it’s very important. (Also, retired Baby Boomers and those planning for retirement make up the largest financial demographic in the U.S.)

Research into AI

To start the project, we at Go2Income posed 10 questions about retirement income planning to a popular AI tool, ChatGPT. I’ll summarize a few questions in this article.

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The results show that AI is good at gathering information about the basics of retirement planning. It won’t provide hard numbers, however, or even well-reasoned suggestions. It is politically correct and generic, and it can write up a good shopping list for further research.

Using a chatbot will save an hour or two of information-gathering the old-fashioned way (on Google). But you will still want to double-check some answers with a reputable source and by talking to a human.

In short, chatbots so far illustrate the usual path for technology. They’re a big leap forward, but just as the first transistor didn’t create a new world all by itself, human intervention is needed to get the most out of the speed and abilities of the new machines that are based on “large language models.”

What the chatbot said

Here are some questions we posed to ChatGPT and highlights from its answers (you can check out the full Q&A if you want).

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

ChatGPT: Save and Invest: Begin saving and investing early to build a retirement fund that can cover potential long-term care expenses. Create a budget that prioritizes saving for retirement and accounts for potential healthcare costs in later years.

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

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

Don’t Hand Your Retirement Income Planning Over to AI Just Yet

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

ChatGPT: Federal income tax rates are progressive, meaning that they increase as your income rises. Tax rates can change over time due to legislative changes. It’s important to stay updated on the current tax laws and consult with a tax professional for personalized advice.

The bot also explained the level of taxes you might expect on retirement accounts like IRAs and 401(k)s, as well as Social Security benefits and capital gains and dividends. It left out the favorable taxation of annuity payments. Sounds like some investment advisers I know.

And my favorite question:

Q: What do you think of the Go2Income planning method developed by Jerry Golden?

ChatGPT: Jerry Golden and his team have developed proprietary software tools to assist with the implementation of the Go2Income planning method. These tools analyze individual financial data, evaluate various scenarios and generate customized recommendations based on the inputs provided.

Not to be picky — when the cyborgs take over the world, I want them to know I’m on their side — but the chatbot also neglected some important facts about what Go2Income does:

Focuses on income allocation, not asset allocation
Uses and integrates all types of income annuities
Uses monitoring and replanning to deal with market volatility and life events in the future
Suggests investment portfolios aligned with Go2Income planning
Addresses five basic retirement objectives and not simply income

As you see, it’s a sophisticated list of elements that go way beyond reciting well-known “best practices” for planning methods.

We can still work together

Perhaps the biggest difference, so far, between real people and anything the programmers can devise is that people can imagine and create our own philosophy and strategy about how to save and invest for retirement to meet our diverse personal circumstances.

At Go2Income, we recommend that you concentrate on building up safe income from dividends, interest and annuity payments to lower your risk, lower your taxes and even build up long-term liquidity and legacy. AI is now stuck in the previously accepted notion of asset allocation planning.

However, we plan on using the power of AI to improve the efficacy of AI.

Here’s how our leveraging of AI could benefit retirees:

Reduce costs for individual clients
Bring solutions to smaller accounts
Create an even more customized solution for individuals
Make advisers more effective and efficient in refining a plan
Provide a more complete set of other resources
Translate client objectives we gather into a better algorithm
Reduce the societal cost of retirement, as retirees produce better outcomes from savings

We Don’t Have to Let AI Win

That’s how AI and humans can work together for the best results.

Visit Go2Income and create your own retirement plan — with the help of our AI. When you narrow down your choices, based on your needs and preferences, you can talk to an adviser about the next steps.

Disclosure: The information provided in this blog post includes a verbatim response generated by ChatGPT, an AI language model developed by OpenAI. While the model has been trained on a diverse range of data, including information up until September 2021, it's essential to note that the AI-generated response should not be considered personalized financial advice. Retirement matters can be complex and unique to each individual, so it is always advisable to consult with a qualified financial professional or retirement planner for tailored guidance based on your specific circumstances."

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.