Tax Diversification: Having both pre-tax and Roth accounts can provide tax diversification in retirement, giving you flexibility in managing your tax liability.
Future Tax Considerations: If you anticipate being in a higher tax bracket during retirement, or believe that tax rates may increase in the future, a Roth 401(k) could be beneficial.
Ultimately, the decision may involve a combination of both types of accounts, depending on your individual circumstances and goals.
Some individuals choose to contribute to both a regular and a Roth 401(k) to achieve a balance of immediate tax benefits and tax-free withdrawals in retirement.
It’s advisable to consult with a financial advisor or tax professional who can analyze your specific situation and provide guidance based on your financial goals and current tax laws.
Grading the AI’s Performance
Overall, ChatGPT provided safe, accurate responses by explaining more technical financial products in layman’s terms.
The accuracy of the advice is reassuring among previous complaints of chatbots “hallucinating,” or making up answers for prompts.
It’s also interesting that ChatGPT picked up on the relevance of product diversity when making investment decisions, as that is a bit more nuanced than I expected for an automated response.
Given the highly regulated nature of our profession, it’s crucial that clients are aware that not all advice applies to every situation.
With that in mind, it’s a good sign that ChatGPT prefaces its answer with “it depends on the situation,” which is where a financial advisor comes in.
Using ChatGPT for foundational financial research can streamline the advisement process, so advisors can focus more time on their curated solutions.
Ultimately, encouraging consumers to connect with a financial professional highlights AI’s limitations, making it a helpful tool for both advisors and consumers.
By working alongside AI, advisors can spend less time on internal processes and more time focused on their clients.
Credit: Daniel Chetroni/Adobe Stock
Jonathan Kestle, CLU, is a financial planner, president of Ian C. Moyer Insurance Agency, and co-founder of Cascades Financial Solutions, a fintech venture focused on the design and optimization of retirement income withdrawal strategies. He is a 10-year Million Dollar Round Table member.
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