I Asked ChatGPT To Plan a $25K/Year Retirement Budget — Here’s What It Said
Written by
Laura Beck
Edited by
Molly Sullivan
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Most retirement planning articles assume you have hundreds of thousands saved. But what if you’re working with less? I asked ChatGPT to break down how someone could actually retire on $25,000 per year. The artificial intelligence’s response was surprisingly detailed and realistic.
The chatbot laid out a complete monthly budget, identified the best locations for stretching those dollars and calculated exactly how much you’d need saved to make it work. Here’s what ChatGPT recommended.
Who Can Actually Retire on $25,000 Per Year
ChatGPT started by clarifying who this budget works for. You need to own your home outright or rent somewhere very cheap. You’re living in a low-cost area of the United States or retiring abroad. You’re comfortable with a simple lifestyle without luxury spending.
The AI wrote that this budget requires trade-offs. You’re not taking expensive vacations or eating out regularly. But you’re also not living in poverty if you plan correctly.
Breaking Down $2,083 Per Month
Twenty-five thousand dollars per year equals about $2,083 monthly. ChatGPT provided a realistic breakdown of where that money goes.
Housing should cost between $600 and $900 monthly. This assumes you either own your home and only pay property taxes and insurance, or you rent in an affordable area. The AI specifically mentioned the Midwest and South as regions where this housing budget works.
Food and groceries take $300 to $400 per month. The chatbot suggested mostly cooking at home with occasional dining out. Shopping at discount stores like Aldi and Walmart would keep costs down.
Transportation costs $200 to $350 monthly. ChatGPT assumed you own an older, paid-off car and only pay for gas, insurance and maintenance. The AI mentioned that skipping car ownership entirely and using public transit costs even less.
Utilities run $150 to $250 depending on your state. This covers electricity, water, gas, trash pickup and internet.
Healthcare costs $200 to $350 per month. ChatGPT explained that people over 65 on Medicare with a supplemental plan fall in this range. People under 65 using marketplace plans in low-cost states can also hit these numbers, especially with subsidies.
Phone service costs $20 to $40 monthly. The AI specifically mentioned budget carriers like Mint Mobile, Visible and Cricket.
The remaining budget covers medications and personal care ($40 to $80), household miscellaneous items ($100 to $200), entertainment ($50 to $100) and an annual travel or emergency fund of at least $500 yearly.
Location Makes or Breaks This Budget
ChatGPT stressed that living on $25,000 per year only works in specific places. The AI identified several affordable U.S. regions: western North Carolina small towns, Oklahoma City suburbs, parts of Michigan, New Mexico, small towns in Idaho and Pennsylvania, plus Alabama, Arkansas and West Texas.
The chatbot also suggested international retirement destinations where $25,000 stretches further. Mexico cities like Merida, Puebla and Oaxaca made the list. Portugal outside of Lisbon, Panama, Colombia cities like Medellin and Pereira, and Chiang Mai in Thailand all work for this budget.
Living in expensive coastal cities or major metros makes this budget nearly impossible. The AI was clear that location determines whether $25,000 per year means comfortable retirement or constant financial stress.
How Much You Actually Need Saved
ChatGPT provided the math for how much savings you need to generate $25,000 annually. Using a safe withdrawal rate of 4%, you’d need roughly $625,000 saved to withdraw $25,000 per year without running out of money.
But the AI pointed out that most retirees supplement savings with Social Security. If you receive $15,000 yearly from Social Security, you only need to withdraw $10,000 from savings. That means you only need $250,000 saved instead of $625,000.
This calculation shows why Social Security matters so much for modest retirement budgets. The combination of even a small Social Security check plus some savings makes retirement possible for many people.
The Emergency Fund You Can’t Skip
ChatGPT emphasized building a cash cushion before retiring on a tight budget. The AI recommended saving three to six months of expenses, which equals $6,000 to $12,000 for this budget level.
Unexpected costs hurt more when you’re living on $25,000 per year. A major car repair or medical expense can derail your entire budget without savings to absorb the hit. The chatbot suggested treating this emergency fund as non-negotiable.
Fixed Costs vs. Flexible Spending
The AI broke expenses into two categories. Fixed costs that you must pay include housing, utilities, groceries, healthcare and insurance. ChatGPT said these should stay under $1,600 monthly.
Flexible costs like dining out, travel, shopping and entertainment are where you adjust spending. These areas give you breathing room when unexpected expenses pop up or when you want to splurge occasionally.
States With No Income Tax Help
ChatGPT mentioned that many retirees pay very little or zero federal income tax on $25,000 annual income. But state taxes vary significantly. The AI listed no-income-tax states that help stretch retirement dollars: Florida, Texas, Tennessee, Wyoming, South Dakota, Nevada, Washington and Alaska.
Choosing one of these states over a high-tax state could save hundreds or thousands annually on the same income.
The Automation Strategy
The chatbot recommended automating everything possible. Set up automatic bill payments, automatic withdrawals from retirement accounts and automatic transfers to emergency savings. Automation removes the human element that causes budget failures.
This advice makes sense for tight budgets. Missing a payment or forgetting to save creates problems that are harder to recover from when you’re living on less money.
Can You Actually Do It?
ChatGPT’s $25,000 retirement budget is tight but realistic in the right circumstances. The key factors are housing costs, location and supplemental Social Security income. Someone with a paid-off house in Arkansas living on $15,000 Social Security plus $10,000 from savings can make this work. Someone trying to rent in Boston on savings alone cannot.
The AI’s breakdown shows that modest retirement is possible, but it requires planning, flexibility and willingness to live simply. The budget leaves little room for error, which is why the emergency fund and location choice matter so much.
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