AI pension advice

Mozza001

Bored at work the other day I started asking AI about pensions, I ended up with some pretty interesting theorys

Now I'm a financial illiterate, I just go with what my IFA advises, they invest the money, I watch it grow.

my IFA meetings usually consist of carry on mate, see you next year .

I will be 57 next year.

Last year I took my 25% tax free and went part time, giving g me space to get a new car, travel, genuinely relax however due to bad back I got by a fall last year I've been struggling, and will continue to struggle going forward with work.

Have about 400k crystallized, have played about with Guiide website and with my litd knowledge I assumed it wasn't enough, the issue being all conventional knowledge tells us we will need money until our late 90s and 400k doesn't stretch that far with what I want a month

Then I started watching some YouTube videos about retiring early, which led me onto the boring day at work and AI.

I inputted all my Info, age. pot size, and ideal requirements which seemed massively out of reach but it came up with a plan that peaked my interest.

I want to start with high payments, gradually tapering down as I get older, nothing new I assume, and would ideally like to leave an Inheritance, at the end I was pleased with what came up.

Brief summary of pension plan

18 months cash

18 months bonds

The rest in equities with various scenarios for topping the cash and bonds up as the years progress, i also added I have 50k for emergencies in bank and full state pension..AI advised me I could get 3k net a month for 5 years, 2750 net a month for 5 years, then 2400 bet a month for 10 years, down to 2k net a month in mate 70s and still not run out of money providing the equity market averaged it's historical average and called the plan "moderate" in risk, it also ran a crash scenario in years 2 which said I came out of it unscathed.

I've requested a meeting with my IFA to tell me where I've gone wrong as this just seems too god to be true, but typically he's on bloody holiday until august.

Long winded I know but I guess my question is how reliable is AI for advice?

I will obviously get the proper advice next month, but thoughts please, feel free to tell me why the above is a load of cobblers.

QrizB

Long winded I know but I guess my question is how reliable is AI for advice?

Terrible.

Have about 400k crystallized,

That'll get you about £16k pa forever, or maybe £24k pa until state pension age then £12k pa after that (on top of £12k pa state pension).

All gross, so before tax.

DRS1

On those figures even ignoring tax you will be spending say 800k in the period from 57 to 84. So that is assuming your 400k will double in value thanks to investment return. And you'll have something left over. Maybe it will happen. But my instinct is the same as the one you started with - no way Jose.

Being a luddite I would not knowingly use AI. Some AI answers posted on here do look very impressive but it is only as good as what you put in. For example did you ask it to assume a certain inflation rate?

Your IFA will have a program or two which can simulate drawdown scenarios and various different investment outcomes (including a crash next year). Maybe those programs use AI. Ask him for some projections and see if they are anywhere close to what AI has given you.

Mozza001

https://forums.moneysavingexpert.com/discussion/comment/82058617#Comment_82058617

Of course I'm not taking it as advise, AI gave the plan a name and said it was a common retirement plan, in layman's terms you live off pot one and 2 ie cash and bonds, whilst pot 3 tops pot one up when needed from gains without ever selling from pot 3.

The obvious drawback was in a bad year or 2 that 3k a month turns into 2 k a month and my 50k emergency fund gets utilized.

I'm gonna fire the laptop up and see if I can generate so thing simlair

QrizB

You might like to compare to cFIREsim which does historical back-testing rather than simply assuming average returns.

You'll see what percentage of the time you run out of money before you run out of days.

https://www.cfiresim.com/

fizio

I found that AI is pretty good at this sort of work as its just maths at the end of the day - the issues are usually teh person asking is not being specific enough with the prompts, assumptions and other factors. It’s the same with things like inheritance tax. If the person asking is pretty well clued up on most aspects of finance then they can get very good advice from AI - Obviously it needs verification but at least the person has a good idea of various options and their potential advantages and disadvantages. I am using it for pretty much everything and often cross check with a different AI tools and get it to send me the source it’s using when needed. I am finding it so useful that I have now subscribed to Claude (I found it was the best at using and integrating excel compared to Gemini and ChatGPT. Now that all banks let you download data in spreadsheet format its amazing what you can find out about your finance by using AI to interrogate the data (obviously removing names & account numbers)

barnstar2077

https://forums.moneysavingexpert.com/discussion/6675101/ai-pension-advice

Personally I would start by working out what you want to have each month (plenty of spending money I presume), and then also what you actually need each month/year as a minimum (plus add a couple of hundred quid a month spending money, so you aren't miserable.) Once you have those two numbers then you can work out how much money you will need over your lifetime.

People use 4% of your pot per year as a rough guide as to what you could drawdown with a high chance of success of not depleting the pot in your lifetime, but you have to offset that with the fact that you are not getting any younger.

Personally, I plan on depleting about two thirds of my pension pot by the time state pension kicks in, using the rest of my pension (and a substantial white goods and house maintenance fund in an ISA) to top my money up once SP starts.

I doubt an IFA would look favourably upon this sort of plan though. Firstly, if you do run out of money early and he didn't warn you it might happen you wouldn't be very happy, and secondly because he may be taking a percentage of your fund every year, so running it down may affect his bottom line (unless you only pay for one off advice.)

Mozza001

https://forums.moneysavingexpert.com/discussion/comment/82058659#Comment_82058659

The answer to "how much do I need " is simple, as much as I can get whilst not being reckless, making sure the pot doesn't empty.

I find their is far to much cautious nous when it comes to retirement, I'd rather enjoy the next ten years not the last ten.

I've seen to many people work well into 60s, rerire , and spend the retirement watching soaps and strictly with net worths million+

Mozza001

I caught out AI calculations a couple of times , math's were off. I ended up telling it to check all calculations as much as possible and it ran it through a python something???

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82058669#Comment_82058669

I think the how much do I need question is pretty fundamental. It is no good saying I want a net income of £3k pm if you actually spend £4k per month. Maybe you'll spend less when retired but maybe you won't. There is a thread called The Number which I think is all about this.

Mozza001

https://forums.moneysavingexpert.com/discussion/comment/82058699#Comment_82058699

My plan is high to start, decreasing with age.

Ie as an example 3k for first 4_5 years per month

2700 for the next 4-5

2400 for the next etc etc