There’s no denying that artificial intelligence has stormed into our lives like a tsunami. Now that wave is heading straight for our finances.
In fact, it’s already here. Nearly half of consumers say they have already used AI tools such as OpenAI’s ChatGPT, Google’s Gemini and Anthropic’s Claude to help manage their personal finances or they are considering doing so, according to a recent Experian survey.
And while younger people are more likely to embrace the technology, older generations lately have been hopping on the bandwagon too, with 41% of Gen Xers and 28% of baby boomers saying they are open to using AI for money-related tasks.
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People turn to AI for help on a wide range of financial topics, with savings strategies, credit scores or credit cards, and investing or stock market advice topping the list, according to a survey last year by J.D. Power.
People who ask AI for guidance seem happy with the results. In the Experian study, 96% of those who tapped AI to help them with a money question report that it was a positive experience.
If you’re working with a financial planner, you may think you don’t need to be chatting with the likes of Gemini and Claude. In fact, however, you may already be getting an assist from AI when it comes to your money. Some 57% of financial advisers use AI tools in their work, and another 29% are exploring the idea, a Charles Schwab poll found.
Given how ubiquitous AI is becoming in the world of financial advice, you’ve probably got questions about it — and rightly so.
Can AI really help you make smarter decisions with your money? Can you trust the advice it gives? What financial challenges are the chatbots good at, and where do they fall flat? And how do the recommendations they provide stack up against the guidance of real, live human advisers?
To find out, we decided to put the chatbots to the test — literally. We created a series of scenarios encapsulating common financial challenges people experience at various stages of their lives. The characters are fictitious, but the issues they need help with are real. Then we presented the scenarios to both AI chatbots and certified financial planners to get suggestions from each, and we ran their answers by other experts.
The scenarios, recommendations and findings follow. What we learned from the exercise: The advice dispensed by AI is often — maybe even typically — sound, at least from a theoretical basis, and can be genuinely helpful.
But the bots often miss the human context and emotions that are an integral part of the financial planning process.
“Consumers should view AI as a powerful tool, but not as a source of advice that is inherently reliable,” says K. Dane Snowden, CEO of the CFP Board (the Certified Financial Planner Board of Standards), which sets requirements for planner certification. When it comes to your money, the stakes are too high to rely on a bot alone. Says Snowden, “There should always be a human accountable.”
Here’s a closer look at the AI financial challenge and what it reveals about the power of using technology and human guidance together to help you reach your goals.
Challenge No. 1: Create a Budget
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The scenario: I am 35, single, and rent an apartment that costs 30% of my salary. I earn $65,000 a year and contribute 4% of my income to a traditional 401(k). I owe $1,200 on a credit card and pay $300 a month on a student loan with five more years until it’s paid off. Help me construct a monthly budget.
The chatbots’ advice: None of the chatbots were particularly empathetic about this challenging situation. Instead, they rolled out bullet points and charts to address what they saw as a math equation to be solved.
ChatGPT makes debt the top priority: “Kill the credit card balance fast.” It suggests leaving the student-debt repayment plan as is, as well as boosting the 401(k) contribution to at least 8% of the subject’s salary now, eventually getting to a range of 10% to 15%. How?
Take an axe to non-essential spending, such as entertainment, dining out, subscriptions and shopping, the bot urges, and get those outlays down to 20% to 25% of the monthly budget.
Claude agrees that whittling down credit card balances — and avoiding additional debt — is key. It suggests a two-track strategy, using the “avalanche” method of debt repayment, which focuses on paying off the highest-rate debt first, while simultaneously building up enough savings to cover three months’ worth of expenses so that the subject won’t turn to credit cards in an emergency.
Claude also suggests looking into tax-free accounts, versus tax-deferred plans, for retirement savings. “Open a Roth IRA if you haven’t already,” it said. “At $65k income you’re well within the eligibility limit.”
The human advice: Use the 50-30-20 rule as a “starting point,” says certified financial planner Valerie Rivera, founder and CEO of FirstGen Wealth in Chicago. That rule of thumb suggests budgeting 50% of your income for basic needs such as housing, food and utilities; 30% for “wants” such as entertainment and eating out; and 20% for saving and debt repayment.
Given the constraints of the subject’s salary on how much money there is to work with, Rivera suggests contributing just enough to the 401(k) to get the full employer match (typically 6%). She also suggests looking into income-based student-loan repayment plans that might reduce those monthly payments.
The credit card debt is a “signal worth paying attention to,” says Rivera, indicating the lack of an adequate emergency fund and expenses that are outpacing income.
She suggests that one way out of this box would be to focus on income growth by looking for a job with a better salary, getting a certification that could lead to higher pay or having a conversation with a manager about a long-overdue raise.
“At 35 and making $65,000, the math is just hard, and it only gets harder as life gets more expensive,” she says. “You can only cut spending so far before life becomes unsustainable.”
What the results reveal: Theoretically, the chatbots’ advice is solid. It makes sense to try to crank up retirement contributions and favor Roth accounts when you’re young, build an emergency savings fund, and prioritize paying off credit card debt.
But given this financial profile, tackling all those goals at once will be tough. And suggesting someone contribute to an IRA when they likely aren’t contributing enough money to a workplace 401(k) to qualify for the full employer match is puzzling.
“The level of meeting people where they are is definitely lacking,” says Jeff Judge, a CFP in Forest Hill, Md., who reviewed the AI responses. The messy reality is that you can’t do everything at once when you’re on a limited budget — something the human adviser seems to understand much better than the machines.
Challenge No. 2: Craft an Investment Strategy
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The scenario: I am 45, married, with a combined household income of $125,000 a year and $250,000 saved in a traditional 401(k). What’s the best investment mix for me, now and over time?
The chatbots’ advice: Google’s Gemini begins with a tsk-tsk moment, pointing out that a 45-year-old should have saved three to four times their annual salary by now, not two times, as the subject has. It lays out two ways to approach asset allocation.
The first is via a target-date fund, which assembles an age-appropriate mix of assets that gradually becomes more conservative as you near retirement “without you having to lift a finger.” For a 45-year-old, a typical target-date fund might have 85% to 90% of the portfolio in stocks, with 10% to 15% in bonds.
Alternatively, Gemini says, you can put together a similar investment mix on your own using lower-cost index funds. If you design the investment mix yourself, it says, it’s critical to rebalance the portfolio regularly: “If stocks have a great year and your 75% grows to 85%, sell the extra 10% and buy bonds to get back to your target.”
Claude agrees with the allocation and suggests specific target-date funds to consider, including Vanguard Target Retirement 2045 (symbol VTIVX) and Fidelity Freedom 2045 (FFFGX).
It also gets granular on allocations for a do-it-yourself mix: 35% U.S. large-capitalization equities; 10% U.S. small- and mid-cap equities; 20% international developed equities; 5% emerging-markets equities; 15% U.S. aggregate bonds; 5% Treasury inflation-protected securities (TIPS); 5% real estate investment trusts; and 5% cash or money market funds.
The human advice: This couple have made some strides in investing for retirement but should “push harder” to make sure they have sufficient growth in their portfolio, says CFP Juan HernandezAriano, a principal with WealthCreate in Houston.
He recommends an allocation of roughly 80% in equities and 20% in bonds, which they could achieve by investing in a target-date fund with an expected retirement around 2045. This is appropriate, he says, “if the client is more hands-off and enjoys automated processes.”
If this individual is more of a DIY-er, the planner suggests allocating 55% of the portfolio to U.S. stocks, 25% to international stocks and 20% to bonds, then decreasing the allocation to stocks by about 10 percentage points over the next decade, shifting to fixed-income funds.
Most importantly, HernandezAriano says, it is “not so much about finding the perfect mix, but about what the client can stick with during both good and bad markets.”
What the results reveal: The chatbots seem to enjoy getting into the weeds of portfolio construction, without taking into account practical details of how investing works in real life. Gemini, for instance, favors creating a customized mix over the easier-to-execute target-date solution.
While the recommended investment allocation is age appropriate, the bots didn’t consider the level of risk the person might feel comfortable with. And assembling the funds on your own, and staying on top of continual rebalancing, would multiply the human workload — something else the chatbot failed to consider.
Similarly, Claude recommends well-regarded funds but doesn’t consider whether they are actually available as investment options in the person’s 401(k) plan.
In addition, Claude’s finely chopped and complicated investment mix might make sense in theory, but managing it sounds almost like a full-time job.
In comparison, HernandezAriano points out that successful investing is very much about what the client is temperamentally able to handle without panicking and making bad decisions if, say, stock prices suddenly head south.
Use the tool below, powered by Bankrate, to connect with a financial professional who can help you build a roadmap to reach your financial goals:
Challenge No. 3: Stay on Track for Retirement
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The scenario: I am 55, with $400,000 in retirement savings, and I hope to stop working at 65. My spouse and I make $140,000 a year and contribute 12% of our income annually to retirement accounts, including the employer match.
But we might need to cut back because we also are paying $40,000 a year in college tuition for each of our two children, ages 18 and 20. What steps should I take to ensure I can retire when I want?
The chatbots’ advice: Gemini is a little pessimistic about the goal, calling the situation a “tight spot” that “requires some precise maneuvering.” Assuming 7% annual gains over 10 years, it estimates the couple’s portfolio will be worth $980,000 by the desired retirement age — short of the $1.375 million it projects the couple will need to live comfortably in retirement without the risk of running out of money.
The chatbot recommends keeping 401(k) contribution rates as they are and urges the subject to keep working for a year or two past 65 to allow the portfolio more time to grow and to help delay claiming Social Security so lifetime benefits will be bigger.
Claude calls the plan “roughly on track, but with meaningful vulnerability,” worrying that a market crash right before retirement could negatively impact the portfolio for years to come.
To minimize that risk, it suggests trimming the portfolio’s stock allocation to 55% to 60% in the years before retirement and keeping enough money in cash and bonds to cover two years’ worth of withdrawals so the couple never have to sell stocks during a downturn.
“The college years are the danger zone,” says Claude. “Navigate those without gutting your contributions, accelerate hard from 59–65, and you arrive at retirement in solid shape.”
The human advice: HernandezAriano strikes a more optimistic tone: “We project the client is on track for retirement at age 65,” based on an assumption of annual portfolio returns of a little over 6% a year. His advice is for the couple to stick with their current plan but be ready to make adjustments if market conditions or their personal situation changes.
The big lever they have to work with is the kids’ college expenses. So if the couple are hit with a job loss or an extended bear market, Hernandez-Ariano says they should be ready to cut back on how much they’re paying for tuition.
“I would be very careful not to sacrifice retirement for college expenses,” he says. “Children can borrow for school, but parents can’t borrow for retirement.”
Once the kids have received their sheepskins, the planner suggests the couple pump up the amount they’re putting into savings over their remaining working years, taking advantage of higher catch-up contribution limits for people 50 and older.
That will help ensure a strong finish just before their planned retirement date.
What the results reveal: The chatbots, Gemini in particular, tend to reduce complex financial situations into math equations. If the numbers don’t add up, they suggest changing the goal, rather than presenting options and trade-offs to help reach it.
For instance, if the couple in this case are determined to stop working at 65, one way to get there would be to trim spending in retirement.
The chatbot assumes they will need 80% of their current income to live comfortably after they stop working, but they might be able to get by on, say, 75%, or take a part-time job to generate enough income to make up the difference, as many retirees do.
The human planner’s approach is more nimble and empathetic, and it suggests being ready to change course if circumstances change. “Real life doesn’t happen in straight lines,” HernandezAriano says.
Challenge No. 4: Draft a Golden Years Playbook
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The scenario: I am 65, with a $1 million portfolio, and want to retire within the next year. My spouse is the same age, wants to retire at the same time and will be entitled to Social Security benefits based on my earnings record. We don’t have pensions. Generate an income plan for my retirement years, including a timeline for claiming Social Security.
The chatbots’ advice: ChatGPT says the couple are in a “solid position” heading into retirement. It suggests a “guardrails” approach to withdrawals from retirement savings: Take out 4% in the first year and plan to increase that amount annually by the inflation rate.
But in years when your portfolio is experiencing strong growth, you can boost withdrawals by another 5% to 10%. Conversely, if the market is tanking, trim those withdrawals by around 10% on a temporary basis. Or, if you prefer a monthly check, the bot suggests you consider using 20% to 30% of the funds in the retirement account to purchase an annuity.
Gemini focuses on a strategy for claiming Social Security. It suggests that the lower earner should take benefits as soon as the couple retire with the higher earner delaying until age 70, locking in an 8% raise every year after full retirement age.
That way, the bot says, “When one spouse passes, the survivor keeps the larger of the two checks — you are essentially buying the best ‘life insurance’ possible for your spouse.”
That will require the couple to withdraw more from savings in the first few years of retirement to bridge them until the higher earner starts taking Social Security. Gemini suggests withdrawing 6% to 7% a year until that point, then dropping to 2% to 3%.
The human advice: Many people go into retirement having mapped out fixed annual withdrawal strategies, often using the popular 4% rule. “Not a fan,” says HernandezAriano.
“Inflation, emergencies, more travel in the earlier years, market fluctuations, healthcare changes: Especially for someone who’s just getting to test-drive retirement, it’s important to maintain as much flexibility as possible with your finances.”
Instead, he recommends dividing savings into four buckets, meant to provide funds for the different periods of your retirement. Keep the first bucket, covering years one and two, primarily in money market funds, with 20% in short-term high-quality bonds.
Subsequent buckets, covering years three to five, six to 10, and the years remaining would gradually reduce the amount in cash and shift more into stocks and bonds for continued growth.
HernandezAriano suggests a modest withdrawal rate of 3% to 3.5%, generating $35,000 to $40,000 a year in income on top of Social Security.
What the results reveal: There is a lot of alignment between man and machine in this scenario on elements such as adjusting withdrawal rates as market conditions dictate and the importance of delaying Social Security for at least one spouse to boost benefits over the long term.
The planner’s bucket strategy is the only real point of divergence.
While not necessary to make the numbers work, it’s an appealing approach in terms of human psychology, giving the couple peace of mind that they will always have enough money safely invested to get them through each stage of retirement.
Challenge No. 5: Leave a Legacy
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The scenario: I am 75 and retired, with a $1.5 million portfolio, and my spouse and I want to leave a legacy for our two adult children. We own our own home outright, valued at $750,000, but are considering selling and downsizing.
How should I structure my estate to protect assets, minimize taxes and best pass money on to the next generation?
The chatbots’ advice: “You’re asking the right questions at the right time,” ChatGPT flatters the subject. The bot says not to worry about taxes, given that the federal estate tax exemption is $30 million for married couples.
It mistakenly points out, however, that the high limit is scheduled to decrease when, in fact, the current limit is designed to be permanent under the One Big Beautiful Bill Act passed last year.
The chatbot thinks selling the house and downsizing is a good idea, to simplify the estate and free up cash. And it urges the couple to set aside some money to cover long-term care, if needed, before they start earmarking assets for future heirs.
Claude points out that where the couple live is a key consideration, because many states have a lower exemption threshold for estate taxes — in a few areas as low as $1 million.
It also stresses that selling appreciated assets, such as a great stock pick or a home that has appreciated more than $500,000, could lead to a big tax bill, so it might be better to hold them until death. As for gifting, Claude agrees that you should “never gift assets you might need for long-term care.”
The human advice: When it comes to leaving a legacy, “the question isn’t only how much to leave behind, it’s when,” says Rivera. She, too, says not to worry about federal estate taxes and to focus instead on the types of accounts you’re leaving to heirs to minimize taxes.
She points out that brokerage accounts receive a step-up in cost basis at death, and Roths pass along tax-free, whereas money inherited in a 401(k) or traditional IRA has to be withdrawn within 10 years (for nonspouse heirs) and is taxed at ordinary income tax rates.
Giving while living, she says, can make sense both financially and emotionally; you get to see your heirs use the money when they need it most.
The current annual gift limit is $38,000 per recipient per couple, but you don’t have to pay taxes if you give more; the amount just gets deducted from the lifetime exemption at death.
What the results reveal: Each adviser, both tech and human, homes in on a different aspect of this complex challenge — ChatGPT on long-term care; Claude on state estate taxes; Rivera on the tax consequences of different retirement accounts and giving with a so-called warm hand.
And that’s really the big takeaway of the exercise: Different sources provide different information, all of which can provide valuable insights and which should be considered together to devise the best strategy.
The bottom line:
Taking the advice in all five scenarios into account, what we found is that the chatbots’ counsel, by and large, is solid, following common financial planning guidelines.
The bots occasionally got a fact wrong, and to be fair, humans sometimes do as well. But it’s especially important to double-check AI’s financial information, which might be dated or fail to take into account the particulars of a questioner’s situation.
That’s the bigger issue: The bots’ curiosity is limited. In our challenge, they rarely asked follow-up questions, and their understanding of human behavior, frailty and common mistakes, which play an important role in how we manage our money, seemed limited or absent.
Their approach felt very, well, machine-like in situations where emotional insights matter and need to be incorporated into the advice.
“One thing to note about AI is that it only answers the question that you ask,” says Judge. “It’s not asking for additional information or asking for clarification. It’s not getting to know your personal situation. The how of financial planning is the easy part; the why often takes more thought and experience.”
In the end, your financial life can’t be reduced to a math equation — and math is what the bots really excel at. Money is a highly emotional subject: It involves our pasts, our patterns, our deeply held desires, and our hopes for the people we love as well as for ourselves.
That’s something a human planner can understand. A chatbot? Not so much.
But we have to tip our hat to Claude’s surprising conclusion, which was to direct the subject in the final scenario to meet with an estate planning attorney and financial adviser — the “one meeting you need to have.”
A machine working in concert with humans: That might be the smartest advice of all.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
