Artificial Intelligence and Retirement: Friend or Foe?
Can artificial intelligence (AI) handle anything? The truthful answer is that it depends on what you ask. This is especially true when it comes to navigating the complexities of retirement. Certainly, like any computer, AI excels at number-crunching. But is it reliable when it comes to helping you plan your financial future? The answer is nuanced.
Generative AI platforms, like ChatGPT and others, are rapidly evolving. Their capacity is improving with each iteration. It’s only natural to consider these tools when thinking about retirement. However, your generation may affect how you feel about AI’s reliability in this area. One survey indicates that nearly two-thirds of Gen Z and Millennials would follow the retirement advice generated by AI, while 58% of Baby Boomers and 75% of the Silent Generation express a lack of trust.
What does all this mean for your retirement plans? Let’s explore the role of AI in your financial strategy.
The Numbers Game: AI’s Strengths
Retirement involves many numbers, which AI can handle with ease. Retirement also necessitates asking the right questions to arrive at the best answers. This is where AI can either be a powerful ally or surprisingly dangerous.
“There is something known as paralysis by analysis,” says Anthony Alexander DeLuca, senior financial advisor at Delta Advisory Group in Orlando, Florida. “That is, being flooded with too much information that the right choice becomes muddled. AI sifts through the data using algorithms and expedites diagnosis on risks, goals, and returns to find the best and most appropriate strategies.”
AI as a Financial Navigator
AI platforms can act like GPS for your road to retirement. Set your destination and they’ll guide you to avoid traffic. These tools can offer individuals optimized strategies based on spending, risk tolerance and market conditions.
“Tools for financial analysis that are powered by artificial intelligence can be used to offer an individual retirement investment strategies that are optimized to their spending, risk tolerance, and market conditions,” says Neal K. Shah, CEO of CareYaya Health Technologies in Research Triangle Park, North Carolina. “For individuals facing the overwhelming amount of choice in the retirement planning process, this can help to considerably streamline decision-making and make the process more manageable.”
Asking the Right Questions
Don’t be fooled into thinking AI will pick out winners. Instead, use it to ask big-picture questions about economic history, market trends, and how past policies have affected people like you. Use that analysis to make your own investment decisions.
“Selecting appropriate investments is difficult but financial software makes this easier by evaluating market trends and assessing personal risk preferences,” says Arvind Rongala, CEO at Edstellar in Bengaluru, Karnataka, India. “Retirees can develop a stable portfolio through data-driven insights which helps to ensure their long-term financial well-being.”
Managing Retirement Finances with AI
Newly retired people must continue growing their portfolios. AI can offer insights into how to avoid risks and best reach those goals.
“AI is going to use its infinitely growing database of financial knowledge to pinpoint the exact decisions one needs to take for the most successful financial future,” says DeLuca. “That includes understanding risk capacity vs. tolerance, cash flow analysis and appropriate budgeting, and the ‘most correct’ investments to help reach such goals.”
AI can also help manage budgets and consider various options that will ensure people can avoid challenges when living without a salary. AI can simplify retirement finances by automating budgeting, forecasting cash flow, and managing investments with adaptive algorithms. It’s essential that retirees seek human oversight for major financial decisions.
“AI can simplify retirement finances by automating budgeting, forecasting cash flow, and managing investments with adaptive algorithms,” says Shah. “It’s essential, however, for retirees to ensure that AI-driven recommendations align with their personal goals and to seek human oversight for major financial decisions.”
The Importance of Verification
Always verify information. Automation tools’ predictions about future expenses and savings possibilities should fit your extended financial plans.
“After retirement, many individuals find monitoring expenses and handling cash flow management to be an overwhelming task,” says Rongala. “Retirees should verify that automated budgeting tools’ predictions about future expenses and savings possibilities fit their extended financial plans instead of just short-term financial benefits.”
Verify AI’s recommendations and consider possible pitfalls, such as biases in algorithms.
“For individuals, tools that utilize AI can analyze massive amounts of data and, based on individual situations, simulate future scenarios faster and provide more tailored investment strategies,” says Liang Zhao, CEO at Vansary in New York City. “One platform that caught my eye recently is a company called High Peak. The platform leverages Prudential data and has built advanced AI solutions that can make smart recommendations that align with personal goals and risk tolerance. Its advanced modeling platform can provide individuals with real-time insights and forecasts—all beneficial for plan sponsors also who are looking for better modeling capabilities. A possible pitfall to watch out for includes biases in AI algorithms, which can be derived from skewed training data. For example, if the dataset doesn’t include diverse data points, the output will not be able to capture the particular nuance of the situation.”
AI: A Tool, Not a Solution
AI is a tool; it’s not magic. If used correctly, it can work for you. If used incorrectly, it can be harmful. To use AI to its full potential, don’t ask it to pick winners. Work with it so it guides you to think smarter. A comfortable retirement means more than what AI might suggest; it’s a situation where you are responsible for minding that store.
