Retirement Planning in the Age of AI

When making your retirement plans, setting a target retirement age gives you an idea of what your Social Security benefits will look like and how much you need to save each month to hit your nest-egg goal.

Unfortunately, many people are making a dangerous mistake when setting their retirement age — at least according to finance expert, Suze Orman.

Orman has long warned that far too many people plan to work into their late 60s, and even into their 70s, despite the fact that doing so may not be realistic.

Now, however, Orman believes that employees who plan to work later into their lives may not even have the chance to because of AI.

Orman warns that AI could put workers at a real risk of retirement insecurity and that the job market is only getting tougher.

AI Disrupting Workplaces and Accelerating Worker Exits

Orman believes that AI is disrupting workplaces and that when AI enters an industry, actual worker exits accelerate.

She believes this trend will continue in the coming years and affect every generation, especially those already in their 50s who won’t have enough savings to support themselves if their plan was to work well into the 60s and 70s but AI ends up replacing them.

Forced Early Retirement: A Total Disaster

Orman’s concerns are justified. For one thing, forced early retirement can be a total disaster.

For example, if a 50-year-old Gen Xer with $215,600 saved in their 401(k) retires at 62, they’d end up with just $675,681, and if they started Social Security immediately, they’d get hit with more early-filing penalties, bringing their benefit down to $1,750.

This would leave them with just $48,027 in total income from both sources, which is $12,972 less than what they’d have if they retired at 65.

Will AI Really Force You Out?

The big question is whether workers will actually be forced out of their jobs due to AI, as Orman warns.

Unfortunately, a lot of evidence points to yes.

We’ve literally watched automation eliminate jobs before, especially in manufacturing, and the reality is AI will eliminate more jobs, too.

The Boston Consulting Group reports that as many as 10% to 15% of jobs could be eliminated by AI within five years or so.

This spring, AI became the leading stated reason for corporate job cuts for the first time ever.

How to Adjust Your Retirement Plans

Orman is clear about how you should adjust your retirement plans in light of the AI boom.

She advises taking two steps: saving more for retirement and embracing change so you don’t get left behind.

Orman is not suggesting changing what you’re investing your retirement money in, but rather designing an investment plan that would allow you the flexibility to retire earlier than you may have planned.

This way, if you retire at 62, any extra years of work are a bonus, and you entirely avoid the crisis that can occur with finding out you’ve lost your job at 63 and have to scramble to find another job because you aren’t actually prepared to retire until 65 or beyond.