ChatGPT vs. financial adviser: We asked both one question — how much should I have saved for retirement? Here’s how each stacked up.

So MarketWatch Picks decided to pit man versus machine and test the latest tech phenom’s financial prowess. To start, we began by asking the platform’s most updated version, ChatGPT-4, one of the most common questions Americans have for their financial advisers: How much should I have saved for retirement? And then we asked a financial adviser to critique it. (Looking for a new financial adviser? This tool can match you to an adviser who meets your needs.)

How much should I have saved for retirement? AI and a financial adviser weigh in

ChatGPT-4 response:

“The amount you should have saved for retirement depends on various factors, including your age, lifestyle, and retirement goals. Here are some general guidelines to consider:

1. Retirement goals: First, consider what type of retirement lifestyle you want. Do you plan to travel extensively, downsize your home, or work part-time? All of these factors will impact the amount you need to save.
2. Retirement age: The age at which you plan to retire will also affect how much you need to save. If you plan to retire earlier, you will need to save more to cover your living expenses for a longer period of time.
3. Social Security: Social Security benefits can provide some income during retirement, but they may not be enough to cover all of your expenses. Consider how much you will receive in Social Security benefits and factor that into your retirement savings plan.
4. Current savings: Take a look at your current retirement savings and estimate how much you will have by the time you retire. If you are behind on savings, you may need to save more aggressively to catch up.

As a general rule, financial advisors often suggest that retirees should aim to replace at least 70% to 80% of their pre-retirement income. This means if you currently make $100,000 per year, you should aim to have $70,000 to $80,000 per year in retirement income. To achieve this, you may need to save between 10% and 15% of your income annually starting as early as possible in your career.

It’s important to remember that retirement savings goals are not one-size-fits-all. It’s always a good idea to consult with a financial advisor who can help you determine your retirement savings needs based on your individual circumstances and goals.” (Looking for a new financial adviser? This tool can match you to an adviser who meets your needs.)

It should be noted that much of this response from ChatGPT was nearly directly pulled from various stories on the topic from places like Bankrate, The Motley Fool and Investopedia, to name a few.

Response from a human financial adviser:

The answer is correct, but also not entirely helpful to someone actually trying to figure out retirement savings themselves, says Nicholas Bunio, a certified financial planner with Retirement Wealth Advisors in Berwyn, Pennsylvania. 

Bunio — who has been an accredited financial advisor for nearly a decade and studied financial services at Penn State — says the main area where ChatGPT misses the mark is with its lack of context and ability to include various key factors. When it comes to setting retirement objectives, for instance, “part of the goal could be to leave an inheritance, take care of grandkids, retire early and start a consulting business,” Bunio says, to name a few possibilities. 

Considering the program’s response on the ideal retirement age, Bunio says that too can change on a case-by-case basis. “If someone is sickly, had a few bouts of cancer in the past, it might be prudent to retire sooner and not plan on living to 100, but to 90 or 85,” he says, adding that “clients don’t realize that, for some, planning on living shorter is better.” Another case not taken into account, he says, is that “someone not married won’t have to worry about taking care of a spouse when he or she passes away,” and that “couples who are healthy need to plan longer, like to age 100,” and that “single people who are sickly should plan to 85 or 90, at most.”

It’s the same case with its advice on Social Security, Bunio says. “Maximizing Social Security doesn’t mean take it at 70. If you are planning on living a shorter amount of time, then taking it sooner is more prudent,” Bunio explains, adding that “if you don’t live as long but take it at 70, you didn’t enjoy it as much or earn as much, even with a higher benefit amount. Plus, depending on the situation, it could be more prudent to start at 62, simply to rely less on your investments. If someone has $5 million saved, and only needed $2 million, Social Security isn’t going to help them much. And if they rather leave an inheritance, start Social Security at 62 and enjoy that money. That way less investments are used, with potentially more going to heirs.”

When it comes to planning out your own savings strategy, Bunio again says the suggestion from AI is “just too vague.” And while it may be true, the part where a professional financial adviser can be uniquely helpful is for actual tailored strategies for “how to determine” how much a client needs. “Taking your income sources in retirement — like Social Security, pension, part-time work — and adjusting it for inflation each year over 30 years, determines how much total spending might be, before emergencies,” he says. “Taking your assets and adjusting for investment gains and losses then comparing that number to your expenses can show just how much more is needed.  For some, they might be ten thousand dollars off.  Others could be hundreds of thousands.”

Although Chat GPT acknowledges the “general rule” that retirees should expect to replace 70% to 80% of their pre-retirement income, Bunio says “again it is too general,” and that “others might need far less or much more. In many ways, most people spend close to what they are spending now in retirement. In fact, spending usually increases in the first few years of retirement as people pay off debt, travel a bit, and try new things.  Then it slows a bit in their late 70s and 80s,” and increases again in a client’s “late 80s as healthcare costs start to add up.”

The verdict

If you’re looking simply for directional advice or to learn more about retirement, ChatGPT can deliver — and it’s simple to use and free. You can also ask it follow-up questions for more detail. That said, you will want to make sure the advice it gives you is accurate, and know that you may need more nuance to accurately plan for retirement.

That’s something a financial adviser can help you with, but the downside there is that it’s not free. (Looking for a new financial adviser? This tool can match you to an adviser who meets your needs.)