Does It Make Sense To Delegate Your Retirement Planning Task To An AI Tool?

Artificial intelligence is the latest technology to help humans perform tasks which are quite routine. As technology improves, artificial intelligence can also be used for complex tasks

Amit Sethi
July 15, 2023
Does It Make Sense To Delegate Your Retirement Planning Task To An AI Tool?

We have all heard about emerging AI tools such as ChatGPT and the Bard. These tools answer many of your queries by using complex algorithms. First, you are already using AI for many of your tasks, albeit unknowingly. A few examples are instant loan approval, a recommendation system for books and visiting places, and a fraud detection system. AI has been found much more effective than humans for many of these tasks. They handle more functions than normal human beings. So, we can now say AI is not totally new to you. So, why not ask AI to plan your retirement? Let’s discuss the possibility of using AI for your retirement planning.


Investment Advice Is A Perfect Fit For AI

Retirement planning is about planning to build a corpus for your retirement. The corpus is an outcome of judicious investment which is decided by your risk appetite and investment horizon. The artificial intelligence system builds on the same concept. It understands that a professional of 35 years of age can take more risks than someone at 50. The investment horizon before retirement is closer to 25 years for the former but only 10 years for the latter, assuming a retirement age of 60 years. So, it may advise the 35 years old, an equity-oriented scheme, while the same cannot be recommended for 55 years old. In the latter case, it may advise debt-heavy funds with much lower risk.

AI Keeps Learning

Finally, the outcome of artificial intelligence is based on complex algorithms, data and rules. The more data it has, the better its decisions will be. As AI serves more and more people and receives more data points, it keeps refining its advice. This is popularly known as machine learning. The advice is based on pure data science. While humans, too, can process data, the sheer variety and volume of data AI can process is tremendous.

A Word Of Caution

While AI has penetrated most of our lives, there are a few things that only humans can do currently. An example could be how to react to events that impact your investment. How to change with the changing situation? Not that AI cannot handle such a situation if given the right quantifiable data, but there are a few things that data cannot express. For example, my risk appetite can differ from someone of the same age and retirement corpus. This could be because of differences in knowledge, environment, or simply human nature. AI will have a hard time capturing these parameters. But sooner rather than later, AI is expected to be able to take decisions like humans and be as agile as us when it comes to responding to events. So, if you want to delegate your retirement planning task to an AI, you may consider its outcome as a strong suggestion and decide with the simultaneous involvement of expert human intervention.


The author is an Independent Financial Journalist.

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