AI could revolutionise your retirement. But don’t fall for this trap
Idea
Retirement planning is undergoing a powerful AI-driven revolution, and not just in the office of financial advisors who are adopting it to speed up their business and increase their margins. This happens around the kitchen table, on the couch late at night, and in bed, too.
More than 65 percent of retirees society This week, 38 percent admitted to using it to ask questions and make calculations.
These two numbers tell us something important: People are hungry for accessible, affordable, and helpful answers, and they will find ways to get those answers with or without industry approval.
The financial services industry has not entirely welcomed this change. If you’ve spent any time in consulting circles, you’ll understand why: For the first time, the knowledge gap that makes professional advice necessary for people facing relatively simple situations is beginning to close.
In my opinion, AI is the best thing that will happen to retirement planning in 20 years. It’s the only tool I’ve ever seen that manages to enable ordinary people to explore their money in an easy-to-use and engaging way.
I will say what many people won’t say; Every Australian heading into retirement should have AI turned on on their phone right now and ask it the questions the system has made it too expensive, too scary and too hard to answer.
AI is not a replacement for learning how things work from reliable, factually accurate sources.
You should ask him how things work. Ask him to explain compound interest and inflation until it finally makes sense to you. You should have him explain the different ways to calculate how much you need and how long your money will last.
You should also ask your pension fund the questions you are embarrassed to ask about whether you will be eligible for age pension and how this might work with your pension fund.
And when you reach a decision point, throw it out there – before you buy, ask who has an interest in you making the decisions in front of you, what it means for them, what it is for you, and whether your interests are aligned.
Ask this question at 11pm in your pajamas on a Sunday night when you’re now looking forward to going to work. Or ask it on Thursday, at lunch, when you’re tired of meetings. He will not judge you. It won’t send you a multi-thousand dollar bill and make you feel like you should already understand how things work.
But use it carefully and know where it is located in your toolbox. Because AI cannot replace learning from valuable, factually accurate and reliable sources how things work. It’s also not what you should consider a “safe” place to upload your own personal data. And it shouldn’t be your primary source of unchecked advice.
MIT Sloan finance professor Andrew Lo, who has been researching AI and retirement planning since ChatGPT’s launch, said in a recent talk that AI is really good at explaining trade-offs, exploring scenarios, and behavioral coaching, but falls short on precision tax optimization, math, and compliance. He says AI reasons based on probability and narrative rather than algorithmic logic, which means its math can be unreliable. Be careful.
I have tested both ChatGPT and Claude extensively. I ran retirement predictions, modeled downturn scenarios, created calculators for the sweet spot, and asked AI to calculate how long superequilibrium would last under different conditions.
All too often, unless very specifically directed, age pension thresholds are out of date, with ASFA’s comparisons from the previous year resulting in inflation either missing entirely from the calculation or remaining at a figure that bears little resemblance to what Australians have experienced recently.
It looks right. And it is offered with absolute confidence. So unless you already know what these numbers should look like, you’ll never know to question it.
But the good thing is, if you know how things work and you step back, question the inputs used, and work back and forth to check the figures against actual sources, rather than relying on it. It can provide really useful information. The problem is not the vehicle; It’s knowing how to use it well or knowing that it’s giving you wrong information.
Think of it this way. Ask your AI “will I have enough money to retire?” and if you don’t know the questions you need to keep track of about inflation, age pensions, compulsory retirement rates or how risk ranking might affect your retirement if the markets fall in your early years, you may have a bold new level of assurance, but your simple question may have an overly simplistic answer.
But if you understand age pensions, pension compulsory deduction limits, bucket strategies, risk ranking and how spending works safely, you can direct the AI and guide the conversation, provide it with up-to-date input and step back when something isn’t going well. You can ask what is left out of the calculations and manually check the entries against actual sources.
In this case, AI can help you understand your options and make better decisions. That’s because, unlike anyone in the financial services industry (a financial advisor or super fund advisor), he can discuss options with you without a product to sell and without an ongoing fee-for-service arrangement that could color his thinking for the rest of your retirement.
With AI at your fingertips and many questions in your mind, I want you to use it carefully, not as an oracle but as a collaborative partner. Start a project that you’ll use for your requirements planning questions so he or she remembers the work you did together. And think of it this way.
Describe your scenario parameters in an impersonal way, as if sharing a case study. Never enter actual personal information such as your name, date of birth, tax file number, pension balance or member number or account information. Use round numbers, which are non-personal data that are close enough to be useful but do not contain anything that could reveal you if that data were compromised.
Then think about what you could use it for:
- Ask him to teach you the basics of retirement finance and recommend books, websites, and people you can follow to support your learning journey. Check them out.
- Use your options to develop your multiple options. Then ask him what was left out of each and why.
- Ask him to verify that the information he uses is accurate and up-to-date, and ask him to provide you with source links so you can see and review the main sources of the entries.
- Ask him to tell you why this might be wrong and discuss your thoughts so you can find weaknesses in the scenarios you created or reasons why they may not work as planned.
- Ask him to create a financial model in Excel and show you the calculations that underpin his results. Download Excel, improve it, adopt it, use it to learn.
- Ask them to point out uncertainties and things you need to worry about so you can question them further.
Then ask the questions you need answered and ask who the most reliable source of the answers is (whether it’s your super fund, your financial advisor or a government website) and then follow the breadcrumbs to test what you’ve found.
Just don’t be afraid to ask. What will hurt you is not asking, but blindly acting on the answers.
Bec Wilson is the bestselling author How to Have an Epic Retirement and new releases Prime Time: 27 Lessons for the New Middle Life. Writes a weekly newsletter epicretirement.net and hosts prime time podcast.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
Expert tips on saving, investing and making the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.
Bec Wilson is the author of How to Have an Epic Retirement and writes a weekly newsletter for pre- and post-retirees at epicretirement.net.
