CFP Flags 3 Risks in ChatGPT-Generated Retirement Budget

The average U.S. retiree spends around $59,600 a year, according to the latest Federal Reserve data. That breaks down to roughly $4,967 per month. Your own expenditures might be much higher or lower, but no matter how much you spend, it's important to follow a financial strategy.

I'm a Financial Planner: 3 Costly Decisions To Revise in Year One of Retirement

Don't Miss Out: 7 Clever Ways Retirees Are Earning Up to $1K Per Month From Home

We asked ChatGPT to build a simple retirement budget suitable for most retirees. Here's a look at what it said, along with insights from a certified financial planner (CFP) around potential red flags.

Budget Outline

A simple retirement budget should "focus on covering essential living costs, healthcare and a reasonable lifestyle," according to ChatGPT, while also aligning with income sources such as Social Security and savings.

Here's the simple budget it provided:

• Housing (25% to 35% of spending): This would cover mortgage/rent, property taxes, home insurance, maintenance, HOA fees and related costs.

• Utilities (5% to 10%): Electricity, gas, water, internet/cable, phone

• Food (10% to 15%): Groceries and dining out

• Healthcare (15% to 20%): Medicare, supplemental insurance, out-of-pocket costs and other expenses

• Transportation (10% to 15%): Car payments, gas, insurance, maintenance, public transit, rideshares

• Personal & Lifestyle (10% to 20%): Entertainment, travel, hobbies, subscriptions

• Miscellaneous & Emergency (5% to 10%): Unexpected expenses, gifts, donations

As ChatGPT noted, this budget could be impacted over time by inflation, long-term care needs and other factors. It could also be impacted by changes in income.

A CFP's Take

Overall, ChatGPT did a "pretty good job" with its budget, according to Chad Gammon, CFP, RICP, Enrolled Agent and owner of Custom Fit Financial. However, he did spot some red flags, including how much ChatGPT allocated toward certain spending categories.

"I think some of these percentages could be low," Gammon told MoneyLion. "The two that stand out would be utilities at 5% to 10% and healthcare at 15% to 20%. Both of these expenses can surprise a new retiree. Healthcare costs tend to grow faster than general inflation. You will also want to think about long-term care, and see if you can self-fund that or how you would take care of that if the need arises."

Another red flag is lumping miscellaneous costs together with emergency costs.

"They should be separate, and maybe throw miscellaneous in with personal and lifestyle," Gammon said. "A retiree really should have an emergency fund. If they have strong fixed income, like Social Security, three to six months might be alright. But if they do not, then six to twelve months would be a target."

Finally, Gammon said he was surprised there was no category for taxes.

"I've seen retirees believe that they won't be taxed on Social Security or some retirement accounts and it is something that you will want to plan in your budget," he said.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice. It was created with the assistance of artificial intelligence and reviewed by our editorial team for accuracy. However, AI-generated content may be inaccurate, incomplete or outdated. You should independently verify important information through reliable sources before making any decisions based on this content.