3 Ways AI Can Help You Prepare for Retirement — and 3 Ways It Could Hurt
Written by
Sean Bryant
Edited by
Rebekah Evans
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Planning for retirement can feel overwhelming, but what if you had an assistant in your corner? Artificial intelligence (AI) is helping us to become better at saving, investing and protecting our money. We can use sophisticated tools to build personalized plans and algorithms can help protect us from fraud.
However, even with all the benefits that AI can provide, there are also some downsides everyone should be aware of. Keep reading as we explore some of the ways AI can help you prepare but also hurt you as you work your way toward retirement.Â
Smarter Financial Planning Tools
Retirement tools that are powered with AI can help you create a more personalized plan to become a better saver, but also understand your spending and income needs. As your financial situation changes, your retirement plan can be automatically updated. This will help you stay on track without needing to have frequent conversations with your financial advisor.Â
Improved Investment Management
For many people, investing can be the most stressful part of retirement planning. If you’re too conservative, you may not be able to save enough. But if you’re taking on too much risk, you could leave your portfolio vulnerable during market downturns.Â
AI can help you monitor markets in real time and then make any necessary adjustments to your portfolio. This can help you avoid making any emotional decisions and keep your portfolio optimally balanced.
Fraud Detection and Protection
AI is also a great way to detect fraud before it becomes a larger issue. Most large financial companies have systems in place that monitor accounts and are able to identify unusual activity. If a large withdrawal or suspicious purchase appears, you’ll get an alert almost immediately. By catching issues early, AI helps prevent fraud before it drains your savings and derails your retirement plan.
The Risks of Over-Reliance on Algorithms
One of the biggest risks of using AI to prepare for retirement is overrelying on its algorithm. While these are powerful tools, they don’t always see the full picture of a person’s life. They may overlook important factors like unexpected medical costs, family obligations or detailed tax strategies.
While AI is great for optimizing the numbers, it’s not always going to be a good replacement for the personalization that a financial advisor can provide you. They’ll be able to make sure there aren’t any obvious gaps in your retirement plan.
Bias and Market Limitations in AI Tools
AI operates by understanding patterns in past data. Unfortunately, the stock market doesn’t always follow the past. AI also can’t predict sudden market changes or new opportunities. At least for now, it can’t understand when a geopolitical event will cause the markets to suddenly make a drastic move. While AI offers valuable insights, it should be viewed as a guide rather than a guarantee for making informed investment decisions in retirement planning.
Data Privacy and Security Concerns
When you use AI to come up with a retirement plan, you’re providing it with highly sensitive information. There’s always the chance that information could be exposed within a data breach. Giving up control of your financial information means trusting that the platform will keep it safe, which is not always guaranteed.
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