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Can’t Afford a Financial Planner? AI Might Be Better Than Nothing
By Martha C. White MONEY RESEARCH COLLECTIVE
A new study finds that folks who utilized both human financial planners and AI tech were 254% more likely to save for retirement.
More than half of Americans use artificial intelligence to help make financial decisions — and that might not be a bad thing. A new study found that people who used AI tools were more likely to save for retirement, although researchers noted some important caveats.
The paper, published last week in the journal Financial Planning Review, found that workers who consulted AI tools were 75% more likely to save for retirement than those who didn’t seek retirement advice from any source.
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The study — which didn’t make a distinction between algorithmic investing tools like robo-advisors, general-purpose chatbots and financial service providers’ AI agents — also looked at how working with financial planners influenced people’s savings behavior. People who conferred with financial planners were 181% more likely to save for retirement than those who didn’t. Folks who utilized both humans and AI tech were more likely to save for retirement by a whopping 254%.
Eric Ludwig, director of the Center for Retirement Income at The American College of Financial Services and one of the study’s authors, says people can benefit from the speed and accessibility of AI as well as more sophisticated guidance from professionals.
“What we theorized was that AI and human advisors are performing two different functions,” he says.
Not everyone can afford, is comfortable with or has access to a human advisor. For workers who can’t turn to a financial pro, experts say the study makes a compelling argument that chatbot advice can be better than no advice at all in certain circumstances.
“The familiar AI platforms people use in all sorts of other ways have some benefits in helping people walk through goal setting and scenario testing,” says Michael Foy, managing director and head of wealth intelligence at JD Power.
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Determining whether AI can help you with a particular aspect of your personal finances depends on what you’re trying to figure out, Ludwig says.
“It’s a complexity thing. If it’s a fairly simple, straightforward issue… using AI compared to no source is better,” he says.
But AI in general and chatbots in particular have their limitations, he adds. AI tools make it easy to ask questions and get answers in plain English, which makes them popular, but AI can make mistakes or outright make things up.
Ludwig says that “the thing advisors are really good at is asking all of the right questions” to figure out, say, how much of your 401(k) should be in stocks versus bonds if you’re three years from retirement with one kid in college and a decade left on your mortgage. Chatbots, on the other hand, are trained to respond with answers, not more questions, so the advice you get might be incomplete or not suitable for your specific circumstance.
The other sticking point is that the granular detail a financial advisor might need to give you the best advice is also the kind of information you should be cautious about typing into a prompt box.
“My concern is sometimes we treat AI as this private counselor,” Ludwig says.
In reality, you shouldn’t assume an expectation of privacy when interacting with chatbots.
“You’ve got to be very careful about personally identifiable information,” Foy says. “It’s a double-edged sword. On one hand, the more information you can give it about yourself, the better response you’re going to get.”
But you don’t want to overshare and make yourself vulnerable to phishing attacks or identity theft. For a gut check, Ludwig says you should ask yourself: Is this information you would readily publicize on your social media accounts or post on a bulletin board at work? If the answer is no, you probably don’t want to share it with AI, either.
How to get safe, useful retirement advice from AI
If you’re going to ask AI for help with retirement planning, proceed cautiously. Ludwig and Foy say there are a few guidelines to keep in mind.
Don’t share personal info. This includes your full name, birthday, address, phone number and Social Security number as well as your bank, brokerage or retirement account details, including account numbers and login credentials.
Experts also advise against sharing your exact salary, account balances and tax return information, which could be exploited by scammers.
“You can probably feel comfortable with things like allocation percentages. Dollar amounts might make me more concerned,” Foy says.
Ask the bot what it needs. If you’re using a general-purpose chatbot like ChatGPT or Claude, Foy suggests using a prompt that states your question — for instance, “Will I have enough money saved to retire in 20 years?” — and asks the bot what information could help it answer you.
Just remember to use round numbers to avoid divulging sensitive financial details. For instance, “I contribute roughly $1,000 biweekly to a 401(k) with a current balance of almost $125,000,” is sufficient.
Use your retirement plan’s resources. Foy points out that many big retirement plan administrators have added AI capabilities. If you have a 401(k) or an IRA, see what tools the platform offers.
Roughly 2 in 3 workers surveyed by financial services platform Savvi Financial said they would trust AI-generated financial advice accessed via their employer’s retirement plan.
There’s a good reason for that, Foy says. AI inside your retirement plan has an advantage over general-purpose AI like ChatGPT because it can access personal data, like your complete account statements, that you shouldn’t share with a chatbot.
Take responses with a grain of salt. “None of these platforms have any kind of established fiduciary responsibility,” Foy says — which means that if you follow bad advice, the chatbot doesn’t bear any responsibility for the consequences that entail. Human certified financial planners, on the other hand, are legally required to offer recommendations that are in your best financial interest.
While AI can be useful in terms of offering a perspective you might not get from talking to colleagues or your spouse, treat it similarly — as another viewpoint, not a concrete recommendation.
“It’s wise to consult them but not make any decisions based on information from that one source,” Foy says.
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A longtime Money contributor, Martha C. White has written about a variety of personal finance topics such as careers, credit cards, insurance, retirement and shopping, and has edited Money’s Best Credit Cards rankings. She also writes stories about business and the economy for NBC News and The New York Times.