If you’re a millennial, chances are you’ve had a thought or two about retirement planning. No longer the up-and-coming generation, those born between 1981 and 1996 are here and now. “Here” is in an uncertain economy where homeownership is territory only the oldest in this age range might have ventured into, with the average age of first-time home buyers being over 40. And “now,” for many millennials, is “20-something” years to retirement or longer. While the retirement age is officially considered 65, you’ll have to hang on to age 67 if you want full benefits, and that’s if the retirement age doesn’t go up again.
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With these facts in mind, we consulted ChatGPT to see what advice it could offer on how millennials can prepare for retirement with the best shot at being able to put the gold in their golden years.
Invest Early and Often
Here’s some of what ChatGPT recommended first.
Millennials should invest early and consistently. Compounding is something all millennials can still take advantage of as they have a good bit of time before retirement. ChatGPT recommended millennials invest in:
- 401(k) or 403(b) (especially if you get an employer match)
- Roth IRA or traditional IRA
The keys to growing your wealth through a taxable brokerage account are:
- Starting now
- Contributing regularly
- Increasing contributions as income grows
- Choosing diversified, low-cost index funds or ETFs
It’s hard to find much wrong with this advice. It’s been standard counsel since the 18th century, when Benjamin Franklin expressed it as “A penny saved is two pence clear” in his 1737 “Poor Richard’s Almanack,” though many of us are more familiar with the paraphrased “a penny saved is a penny earned.”
Check Out: I Asked ChatGPT When I Could Retire — I Couldn’t Believe the Answer
Lower Costs
ChatGPT followed that up with some common advice for all people.
Millennials should create lives that involve low fixed costs. Expensive fixed costs like luxury cars, expensive housing and lifestyle creep) can ruin your financial picture. Instead, millennials should aim for:
- Reasonable housing costs
- Paid-off (or no) car
- Lean recurring bills
- Savings increase when income increases
If you have lower costs, you’ll be able to invest more now (so it can start compounding sooner), need less for retirement and you might even be able to retire early.
While this advice may seem solid on the surface, it may not be realistic. Reasonable housing costs may be the biggest hurdle, with the most recent data showing that would-be homeowners can expect to pay nearly 50% more than they would have just five years ago. Home prices in 2020 were more than double what they were in 2000, but that increase took over two decades. At their current rates, housing costs could double again in only half the time.
Renters are no better off, with the median rent across the country climbing to just under $2,000 per month. And that’s the median nationwide; larger cities on both coasts see monthly rents ranging from around $2,500 to more than $4,000.
The last things on many millennials’ minds are luxury cars, upscale housing and a fabulous lifestyle. They’re often just trying to get by.
Diversify Your Income Streams
Lastly, ChatGPT gave some advice on building wealth and protecting yourself from financial problems. It said that millennials should create multiple streams of income. This could include investments like stocks, index funds and REITs or real estate, side businesses, digital products and more.
Another $200 to $500 in monthly passive or semi-passive income can work wonders when reinvested for retirement.
However, this advice also misses the mark. While the advice ChatGPT dispenses here was perhaps applicable a year or two ago, the investments it recommended are anything but a sure thing now. Traditional investments like stocks and index funds have posted gains in the past year, but there are clear indications of a rocky road ahead. Changing consumer sentiment has caused some major retailers to downgrade their forecasts. Continued market volatility due to tariff worries and pullback over the growing possibility of an AI bubble has let the air out of both the S&P 500 and Nasdaq benchmarks.
Real estate investment trusts, or REITs, and other real estate investments also aren’t the sure thing they may have been in the pre-COVID, pre-tariff economy. Nearly 80% of all REITs are in negative territory this year. Among the only positive sectors are those involving data centers, and if the AI bubble does in fact pop, those will head south fast.
The other recommendations, such as side businesses, digital products and freelancing, are all affected by the growing use of AI, with freelancing being hit especially hard.
While it is a good idea to diversify, it might be harder than ChatGPT thinks.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT for the 3 Best Things I Can Do To Prepare For Retirement as a Millennial
