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.
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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
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
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."
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to SkipA business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually MagicalDo you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful BillThe law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market JittersMarket volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the SidelinesForget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
Can You Be a Good Parent to an Only Child When You're Also a Business Owner?Author and social psychologist Susan Newman offers advice to business-owner parents on how to raise a well-adjusted single child by avoiding overcompensation and encouraging chores.
-
How Advisers Can Steer Their Clients Through Market Volatility (and Strengthen Their Relationships)Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.
