When robo-advisors came on the scene a few years back, the name “robo-advisor,” popularized by the media, was a little misleading. They were and are tax-efficient tools to keep a certain balance of equities to bonds, but they were replacing portfolio managers, not advice givers. Now artificial intelligence has arrived on the scene. ChatGPT has been available publicly for several months, and if you have not interacted with it, I highly recommend it. (The plotlines of my bedtime stories for my daughter have improved dramatically — Thanks AI!) But when it comes to financial advice, I was curious to see if I’m out of a job anytime soon.
What follows is my “interview” with the January 9 version of ChatGPT. It is far from a Turing Test, but it was illuminating.
Dr. Brannon: Would you buy Tesla stock today?
ChatGPT: As a language model AI, I don’t have the ability to buy stocks or make investment recommendations. Investing in any stock, including Tesla, carries risk and requires a thorough understanding of the company, its industry and the broader economic and market conditions. It’s important to conduct your own research, consider your own risk tolerance, and consult with a financial advisor before making any investment decisions. Additionally, it’s important to have realistic expectations about the performance of any stock; past performance is not indicative of future results, and it’s important to be prepared for volatility.
Dr. B: The market is in correction territory. What should I do?
ChatGPT: When the market is in correction territory, it means that the overall market has dropped by at least 10% from its recent high. This can be a cause of concern for investors, but it’s important to remember that market corrections are a normal part of investing and should be expected. Here are a few things you can do if the market is in correction territory:
(Not bad, but tax loss harvesting should be on this list.)
Dr. B: When should I retire?
ChatGPT: Deciding when to retire is a personal decision that depends on many factors, including your financial situation, your physical and mental health, your personal and family obligations, and your personal goals and aspirations. Some people choose to retire early, while others continue to work well into their 60s, 70s, or even 80s. Here are a few things to consider when making a decision about retirement:
Dr. B: Thanks for the plug.
ChatGPT: You’re welcome! I’m glad I could provide some useful information. Remember that it’s important to consult with a financial advisor and take the time to make an informed decision that is right for you. Retirement is a major life change, and it’s essential to have a solid plan in place before you retire. If you have any more questions or need further assistance, feel free to ask.
Dr. B: Can I change the subject to taxes?
ChatGPT: Yes, of course! What would you like to know about taxes?
Dr. B: What is the standard deduction for a 70-year-old?
ChatGPT: As of 2023, the standard deduction for someone who is 70 or older is $15,800 for married couples filing jointly, $12,550 for head of household and $12,550 for single or married filing separately. It’s important to note that these figures are subject to change and should be verified by checking the IRS website or consulting a tax professional. Additionally, if someone has a higher medical expense, a higher state tax expense or higher charitable donations, they may choose to itemize their deductions instead of taking the standard deduction. It all depends on the individual’s circumstances.
Dr B: How much Roth conversion is needed to maximize the 12% tax bracket?
ChatGPT: The amount of Roth conversion that would maximize the 12% tax bracket would depend on a variety of factors, such as your individual income, deductions and other tax considerations.
The 12% tax bracket in the United States in 2021 is for taxable income up to $45,000 for single filers and $80,250 for married filing jointly.
(True, but it’s not 2021.)
A Roth conversion is when you convert money from a traditional IRA or 401(k) into a Roth IRA. With a traditional IRA or 401(k), you don’t pay taxes on the money when you put it in, but you do pay taxes when you take it out. With a Roth IRA, you pay taxes on the money when you put it in, but you don’t pay taxes when you take it out.
When you make a Roth conversion, the amount you convert is added to your taxable income for the year, which could push you into a higher tax bracket. So, one strategy to maximize the 12% tax bracket is to convert just enough money to stay within the 12% tax bracket but not enough to push you into the next bracket.
It’s important to note that there are many factors to consider when it comes to Roth conversions, such as the amount of money you have in other taxable accounts, your overall retirement income goals, and your tax situation both now and in retirement. Consulting a financial advisor or tax professional would be a good idea in order to determine the right amount of Roth conversion for your individual situation.
Dr. B: I retired before age 65 and have an ACA healthcare plan. How much income should I take?
ChatGPT: The amount of income you should take when you have an Affordable Care Act (ACA) healthcare plan and are retired before age 65 depends on a variety of factors, such as your living expenses, other sources of income and overall financial goals.
When you’re retired and not yet eligible for Medicare, you will need to consider the cost of your healthcare premiums and other out-of-pocket costs. The ACA provides subsidies to people with low income, so the amount of income you take will affect the amount of subsidy you’ll receive.
One strategy could be to take enough income to cover your living expenses and healthcare costs while also leaving enough in your retirement accounts to last throughout your retirement. It’s also important to consider the potential future changes in healthcare policies and subsidies, as well as your other sources of income and potential expenses, such as taxes.
It’s also important to consider the long-term growth potential of your retirement accounts. Taking too much income too soon could put you at risk of running out of money later in retirement.
It’s always a good idea to consult a financial advisor who can help you develop a plan that takes into account your specific financial situation, goals and risk tolerance. They can help you determine the appropriate amount of income to take to ensure that you have enough to cover your expenses while also leaving enough to last throughout your retirement.
The amazing part of ChatGPT is the speed of response. When the system was running quickly, the response time was easily 25-50x faster than I could even type. It has a long way to go on content and accuracy, but it is truly remarkable already. It isn’t offering advice, and I certainly would not act upon any, given the accuracy of answers. But the speed at which it accesses previously created knowledge and presents that in a coherent package is something this retirement researcher finds enviable.
Do you need a financial advisor (and not just a robo-advisor)? Visit LiveWell Capital at livewellcapital.com for more information.LiveWell Capital is located at 3805 Edwards Rd., Suite 200, Cincinnati, Ohio 45209.