Smart Retirement With AI: Leveraging ChatGPT for Long-Term Success

ChatGPT took the world by storm after its release in late 2022. The AI content generator already has amassed over 100 million monthly users.

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Despite the ethical concerns surrounding AI, there’s no denying how incredible the technology is. ChatGPT can debug your code, create recipes, draft a personalized workout plan and even write love poems.

If you need help preparing for your golden years, the AI chatbot can provide assistance, too. Here’s how you can leverage ChatGPT for retirement planning

Also see how baby boomers can embrace AI for financial wellbeing.

Create a Savings Plan

If you’re struggling to create a savings plan to build your nest egg, consider looking to ChatGPT for guidance. This AI tool can help you set retirement goals based on your lifestyle and build a savings plan for achieving those goals. Start by entering key information such as your current age, expected retirement age and current savings. From there, you can ask specific questions to better understand how to achieve your desired savings goal. 

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For example, you could ask ChatGPT questions like, “If I’m 40 now with $50,000 saved, how much will I need to add to my monthly savings so that I have $700,000 in my nest egg by 65?” 

Here’s the answer we got from ChatGPT: “Assuming an annual interest rate of 7%, you would need to save approximately $1,740 per month to reach $700,000 by age 65.”

However, AI consultant Juliet Dreamhunter said, “These estimates can’t predict future market performance and should be only be used as a basic guideline, not a guarantee.”

Personalize Your Investment Strategy

Another way to leverage ChatGPT for long-term financial success is to personalize your investment strategy. If you’re a newbie to investing and don’t know where to start, ChatGPT can help you understand the differences between various investment strategies and accounts. Once you have a better understanding of each investment option, you can create a portfolio that best aligns with your financial goals, risk tolerance level, retirement timeline, etc. 

Here are a few questions you can ask ChatGPT to determine which investment options best suit your situation: 

  • Can you explain the pros and cons of investing in a Roth IRA vs. a traditional IRA?
  • What are some low-risk investments suitable for retirees?
  • What type of annuity would be most beneficial during retirement years? 
  • What’s the difference between investing in ETFs vs. individual stocks for my retirement portfolio?
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We asked ChatGPT to answer our second question, and here are some of the low-risk investment options it recommends: savings accounts and CDs, municipal bonds, dividend-paying stocks, annuities, real estate investment trusts (REITs) and retirement income funds. 

Understand Tax Implications

Most people have limited knowledge about how their income is taxed in retirement. According to a recent survey of more than 1,000 U.S. retirees by the Employee Benefits Research Institute, 48% of the respondents said they didn’t understand how taxes would affect their finances in retirement. Almost 40% said they’re paying different taxes than they had expected. 

If you’re also unsure about how the taxation of your retirement income works, don’t worry. It’s not too late to learn. Instead of scouring the internet for answers, ask ChatGPT. Here are a few prompts to use: 

  • How are withdrawals from a traditional IRA taxed?
  • Do I owe tax on Social Security?
  • Does where I live affect my taxes after retirement?
  • Which types of retirement income are taxable vs. non-taxable?
  • What are the tax implications if I withdraw from my 401(k) early?
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For example, we asked the AI chatbot to explain how withdrawals from a traditional IRA are taxed, and here’s what it said: “Withdrawals from a traditional IRA are typically taxed as ordinary income in the year in which they are withdrawn. The amount of taxes you owe will depend on your tax bracket at the time of withdrawal and the amount of the withdrawal.” 

Explore Different Retirement Scenarios

According to Luciano Colos, AI expert and founder of the AI tool PitchGrade, ChatGPT can also help you explore retirement scenarios.

“By inputting various parameters such as desired retirement age, expected income sources and lifestyle preferences,” he said, “you can simulate different retirement paths and have a better idea of whether your current retirement plan is viable.”

Here are a few example scenarios you could ask ChatGPT to provide insights to: 

  • How long can my retirement savings last if I retire at 65 with $800,000 across all my investments, have no debt, live in Ohio, keep my spending under $2,500 a month and rent out my spare room for $700 a month?
  • How long can my retirement savings last if I retire at 60 with $500,000 invested in stocks and bonds, move to Mexico City, live with my partner and have $15,000 in credit card debt?
  • How much can I afford to spend each month if I live off the grid in Sedona, Arizona, during retirement, earn $1,300 in passive income each month and have around $900,000 in my nest egg? 
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We inputted the first prompt into ChatGPT, and here’s the answer we received: “Assuming a conservative withdrawal rate of 4% per year and an average annual return of 6%, your retirement savings could potentially last approximately 25 years or more. This would provide a retirement income of approximately $32,000 per year ($2,667 per month), which is more than your monthly spending of $2,500. With the additional income from renting out your spare room, you may have some extra cushion in your budget.”

Although ChatGPT can analyze these scenarios and generate insights on potential outcomes, you shouldn’t solely rely on it to make decisions regarding your retirement strategies. Always consult a certified financial planner beforehand. 

Don’t Solely Rely on AI for Your Retirement Plans

While ChatGPT is impressive, you shouldn’t trust it fully. A recent study found that the AI chatbot can “hallucinate” and make stuff up. In other words, the data it generates can sometimes be a mix of real and completely fabricated ones. So, while ChatGPT is a great way to understand basic financial terminology and get some general opinions about your retirement strategies, you still should consult a financial advisor to create a personalized plan that suits your retirement goals. 

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