Not everyone can afford a financial advisor, which can make it difficult to get precise information on how much money you need to retire. While ChatGPT can make mistakes, it’s often a good early resource to get basic information you can then fact check with a simple search online.
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I decided to ask the AI how much money I would need to retire in 10 years and here is what it said.
I started with a generic query, to see what kind of advice it would give without knowing anything about me or my finances, age and proximity to retirement. ChatGPT gave me a basic overview:
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Estimate your annual retirement expenses. After adding up everything from housing and food to entertainment and leisure, and adjusting for inflation, ChatGPT said that annual amount is your “target baseline.” Let’s say this is $60,000 per year. (Admittedly, this is a low annual figure for many people.)
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Subtract other sources of income. If you have other income such as pensions, rental income, annuities and expect Social Security, ChatGPT said to subtract those from what you need to have saved. For example: If Social Security will pay $20,000/year, that’s $500,000 in lifetime benefits (25 years). Your new savings target: $1.5 million – $500,000 = $1 million
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Factor in inflation and health costs. ChatGPT recommended factoring in 2% to 3% annually for inflation, though with the way inflation has been going lately, you might need to account for more than that. Then, it suggested you increase your target savings by 20% to 30% for healthcare and unexpected costs. That would give you an adjusted goal of $1.2 million to $1.3 million.
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Check your current savings and investment growth. Using a compound interest calculator, ChatGPT recommended you figure out a trajectory of growth for your current savings. For example, if you’re saving $5,000/month at a 7% annual return = ~$870,000 in 10 years. If you already have $400,000 saved, total = ~$1.27 million
Learn More: The Money You Need To Save Monthly To Retire Comfortably in Every State
ChatGPT’s bottom line for the “generic me” to retire in 10 years in a nutshell was:
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Target savings: $1 million to 1.5 million, depending on lifestyle and location
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Monthly savings needed: $4,000-$6,000 if starting from scratch
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Growth strategy: Invest in a diversified portfolio (not just savings).
While a good baseline, this generic advice didn’t speak to my specific financial circumstances. While I don’t want to share too many personal details here, I will say that I’m turning 51 this year, so 10 years from now, at 61, would be a very early retirement for me. Though my husband and I have a two-income household, some retirement savings and may be able to pay off our mortgage within the next decade, we live in California, a state with one of the highest costs of living in the entire U.S. We also have one teenager about to head off to college and need to figure out how to finance that. I also have aging parents to consider.
So I gave ChatGPT more personal details about me, including:
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Current age
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Current retirement savings
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Combined annual income with my husband
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Expected retirement expenses
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Social Security plans
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Length of mortgage
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Details about financing our son’s college
ChatGPT recommended I use the 4% rule — where you withdraw only 4% of your retirement savings per year — and add that to my expected Social Security (assuming the fund will remain solvent by the time I draw from it). To do this, for my, admittedly low-balled target of what we would actually need, living in California, of around $80,000 per year, we would need at least twice as much in retirement savings as we have now. So that was sobering. But remember, this was for an early retirement! So, it’s possible we could get on track by my actual hopeful retirement age of 70.
ChatGPT finished by giving me an action plan that could help me stay on track toward an early retirement goal. This included:
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Max out retirement contributions: These include 401(k) plans, IRAs and/or Roth IRAs.
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Use catch-up contributions: Because I’m over 50, I’m eligible to make lump-sum “catch-up” contributions to my tax advantaged retirement accounts, which could give me the benefit of compound interest and significant growth.
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Invest for growth: It recommended I stick to a diversified portfolio “with some equities” for long-term gains.
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Plan health coverage: It told me to keep budgeting for private insurance until I become Medicare-eligible at 65.
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Model a glide path: ChatGPT suggested I shift to “more conservative assets” as I near retirement such as high-quality bonds, exchange traded funds (ETFs) or treasury inflation-protected securities (TIPS).
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Track spending closely: It suggested the obvious advice, that we track spending carefully, especially after mortgage payoff, to “keep lifestyle creep in check.”
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Build a bridge fund: ChatGPT then urged me to consider “a non-retirement investment account” such as a money market account to draw from between 60 and 67.
ChatGPT deemed me to be in “very strong shape” to retire in 10 years if I stay consistent with savings and investing. It certainly gave me food for thought — while I wasn’t considering an early retirement, maybe that reality is more possible than I thought.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How Much Money I’ll Need To Retire in 10 Years: Here’s What It Said
