Getting financial advice from a machine once seemed like the stuff of science fiction.
But is it as effective?
On that score, trepidation about AI-driven advice abounds, especially among older adults.
To be sure, technological change in personal finance is nothing new.
Senior Planet from AARPhas free online classes to help you discover more about artificial intelligence.
Still, when it comes to your money, the quality of advice is critical.
How does that play out in the arena of financial planning?
(ChatGPT has been known to hallucinate more AI-speak for generating incorrect or even fabricated responses.)
We did not ask follow-ups to get more tailored advice, although you certainly can.
But, as in any online interaction, you want to be careful aboutproviding personal informationto an AI bot.
Question 1: What is the best age to start Social Security?
Here are a few key points to consider:
1.
Early eligibility:you’re free to begin receiving Social Security retirement benefits as early as age 62.
If you claim benefits before reaching your FRA, your monthly payments will be permanently reduced.
For each year you delay, up until age 70, your benefit increases by a certain percentage.
This can be advantageous for individuals who can afford to wait and want to maximize their monthly payments.
Financial considerations:Your financial situation and need for income play a crucial role in the decision.
Conversely, if you require immediate income, claiming earlier might be necessary.
Ultimately, there is no universal “best” age to start Social Security that applies to everyone.
Its a way to help you think about stuff.
But it only helps you think about it so far.
Question 2: What are the best investments to generate income in excess of inflation in retirement?
Here are some investment options to consider:
1.
Dividend-Paying Stocks:Look for established companies with a history of consistent dividend payments.
Bonds:Consider investing in bonds, particularly those with higher yields such as corporate bonds or municipal bonds.
Bonds provide regular interest payments and can be less volatile than stocks.
However, be aware that this investment carries a higher level of risk and requires thorough research.
These funds can be an efficient way to generate income while spreading risk.
However, property management and maintenance should be considered.
Diversification and regular portfolio reviews are key to managing risk and ensuring a sustainable income in retirement.
But the laundry list of investment options is so vague it may as well be useless, he says.
At best, ChatGPTs answer is a launch pad for more rigorous research.
Question 3: Im risk averse.
Should I switch my 401(k) from stocks to cash when I retire?
Here are a few points to consider:
1.
However, they typically offer lower returns and may not keep pace with inflation.
Time horizon:Consider your anticipated retirement duration.
The longer your retirement period, the more important it becomes to balance risk and potential growth.
Diversification:Diversifying your retirement portfolio is often recommended to manage risk.
Maintaining a well-diversified portfolio that aligns with your risk tolerance and financial goals can help mitigate short-term volatility.
Professional advice:Consider consulting a financial advisor who can provide personalized guidance based on your specific circumstances.
Diversification and professional advice can be valuable in managing your retirement investments effectively.
Holeman rates ChatGPTs answer a solid B+.
What did he like?
At the same time, it hedges itself by saying consult with an adviser, Holeman adds.
Question 4: What is the best time to convert a traditional IRA to a Roth IRA?
Here are a few factors to consider:
1.
This is because Roth IRA withdrawals are generally tax-free in retirement.
Converting early allows your investments to grow tax-free over a more extended period.
If leaving a tax-free inheritance is a priority, a Roth conversion may be beneficial.
Money you contribute to a traditional IRA is tax-free going in but taxable as income when you make withdrawals.
The first answer here suggests that someone might know their future tax rate, he says.
Do they know if the TCJA will sunset in 2025?
Other points are similarly incomplete, Ogorek says.
Question 5: Im 52 and have $250,000 in my IRA.
Keep in mind that this calculation assumes a constant monthly savings amount and a fixed interest rate.
Additionally, fluctuations in the market and other factors may impact the actual results.
Its essential to review your financial plans regularly and consult with a financial advisor to make informed decisions.
Exceeding the maximum would increase the tax drag on this savings plan, Ogorek says.
And unless youre paying for a ChatGPT upgrade, it wont be able to tell you the current limit.
The standard, free versions knowledge base is limited to content that was online as of September 2021.
A level of nuance and sophistication is lacking here, Ogorek says.
We then asked the same question, with the same numbers, but said we were from Mississippi.
Thats very odd, Holeman says.
This throw in of inconsistency would lead to a lot of problems when trying to build a retirement plan.
