The Advent of AI in Lifetime Cashflow Forecasting: A Paradigm Shift

The Advent of AI in Lifetime Cashflow Forecasting: A Paradigm Shift By Steve Conley

The Public’s New Power: AI-Driven Lifetime Cashflow Forecasting

Recent advancements in artificial intelligence have heralded a transformative shift in financial planning. No longer must individuals rely solely on traditional financial advisers to obtain an initial assessment of their long-term financial standing. With the advent of generative AI, the public now possesses the capability to conduct lifetime cashflow forecasting within ChatGPT—generating reasoned insights in less than one minute. This unprecedented accessibility serves as an invaluable foundation for further discussions with a professional financial planner.

The ability to perform such calculations swiftly and independently marks a significant evolution in financial self-sufficiency. Historically, cashflow forecasting has been perceived as a complex process requiring specialist expertise. However, AI-driven tools have rendered this exercise remarkably straightforward, enabling individuals to ascertain whether they are likely to surpass their retirement objectives or, conversely, risk outliving their capital.

A Case Study: Demonstrating the Simplicity of AI-Driven Cashflow Analysis

To illustrate the efficacy and simplicity of ChatGPT’s lifetime cashflow forecasting, consider the case of Mr. John Edwards, a 63-year-old professional contemplating his retirement trajectory. By inputting basic financial details—current savings, expected retirement age, anticipated expenses, and estimated investment returns—into ChatGPT, he obtained a comprehensive forecast in less than a minute. The model projected his financial sustainability under varying scenarios, enabling him to make preliminary adjustments to his strategy.

What once necessitated protracted consultations with financial intermediaries can now be accomplished autonomously and instantaneously. While such forecasts are not exhaustive, they serve as a crucial starting point, equipping individuals with preliminary insights before engaging with a professional planner.

The Implications for Financial Advice

This democratisation of financial analysis prompts an essential question: will AI-driven insights eventually surpass the quality of conventional financial advice? Given the limitations and conflicts of interest inherent within many financial advisory models—particularly those predicated on commission-based incentives—AI offers an impartial alternative. Unlike human advisers, AI operates devoid of transactional bias, delivering projections based solely on objective data and logical reasoning.

The Chartered Insurance Institute (CII) has raised concerns regarding AI’s ability to render financial decisions, arguing that it lacks ethical discernment (“morals of a calculator!”). However, this critique overlooks a fundamental truth: AI does not require moral judgement to perform accurate calculations. It neither benefits from product recommendations nor seeks to influence financial behaviour for commercial gain. Instead, it functions as a neutral tool, providing transparent, data-driven insights that individuals can then refine through professional consultation.

The Future of Financial Planning

As AI continues to evolve, its predictive accuracy and analytical sophistication will inevitably improve. In due course, the quality of AI-generated financial forecasts may exceed that of the average financial adviser, particularly those whose guidance is shaped by commercial considerations rather than pure fiduciary responsibility. However, AI should not be viewed as a replacement for human expertise but rather as an enhancement—an accessible, preliminary mechanism that empowers individuals to engage with their finances proactively.

For those seeking an initial assessment of their financial trajectory, ChatGPT now provides a viable and immediate solution. The advent of AI-driven forecasting represents a pivotal moment in financial planning, one that shifts agency into the hands of the public while maintaining the role of professional planners as essential custodians of more complex, nuanced financial strategies.

The opportunity to conduct lifetime cashflow forecasting independently heralds a new era—one in which financial clarity is not contingent upon the traditional gatekeepers of the industry but is instead accessible to all. By embracing this technology, individuals can now take the first step towards financial empowerment with greater confidence and ease than ever before.

John Edward’s ChatGPT Case Study

Using ChatGPT o-3-mini-high

Prompt:

“Can you help me with my financial plan. Can you create a lifetime wealth chart. I am 63. My income is ￡30,000 per annum for the next 20 years. My expenditure is ￡25,000 a year for life. I expect to live until I am 92. My assets are ￡250,000 in my business and ￡250,000 in my house. I expect my lifetime savings to grow at 3% per annum. I have a State pension payable for life from the age of 67 of ￡10,000 per annum.“

Reasoned for 54 seconds

Hi John,

Below is a simplified “lifetime wealth chart” based on your details. It shows how your liquid savings might accumulate (and later decline) over time while your business and property assets remain intact. Keep in mind this is a basic model—it assumes constant annual income and expenditure, a steady 3% growth rate on your savings, and no changes in the value of your assets. It also doesn’t factor in inflation, taxes, or unforeseen expenses. Nonetheless, it can serve as a useful illustration of your overall financial picture.

Your Assumptions

• Age Today: 63
• Employment Income: ￡30,000 per annum (for 20 years, from age 63 until age 82)
• State Pension: ￡10,000 per annum (from age 67 for life)
• Annual Expenditure: ￡25,000 (throughout your lifetime)
• Savings Growth: 3% per annum on any surplus (or deficit)
• Non-Liquid Assets: ￡250,000 in your business + ￡250,000 in your house (totaling ￡500,000, assumed to be static)

How It Works

Your net cash flow each year is determined by your income sources minus your annual spending. For example:

• Ages 63–66:Income: ￡30,000Expenditure: ￡25,000Net surplus: ￡5,000 per year
• Ages 67–82:Income: ￡30,000 (employment) + ￡10,000 (pension) = ￡40,000Expenditure: ￡25,000Net surplus: ￡15,000 per year
• Ages 83–92:Income: ￡10,000 (pension only)Expenditure: ￡25,000Net deficit: –￡15,000 per year (withdrawals from your savings)

Each year, your savings balance is increased (or decreased) by that year’s net cash flow and then grows at 3%.

Lifetime Wealth Chart (Selected Ages)

What This Means for You

• During Your Working Years (63–82): The surplus you generate each year not only adds to your savings but also benefits from the 3% growth rate. This accumulation helps to build a buffer that supports your spending later on.
• Post-Employment (83–92): Once your employment income stops, your savings are used to cover the shortfall (a ￡15,000 annual deficit), although the 3% growth helps mitigate the decline. Your non-liquid assets (business and home) continue to underpin your overall wealth.
• Overall Picture: Even with the planned withdrawals during retirement, your lifetime savings combined with your assets provide a reassuring level of wealth, helping to maintain your standard of living.

Next Steps

This chart is a starting point for understanding your financial journey. At the Academy of Life Planning, we believe in transparency and a holistic view of your finances. We can explore additional factors—such as inflation, tax implications, and potential investment adjustments—to tailor this model even more closely to your goals.

If you’d like to delve deeper or discuss other aspects of your financial plan, I’d be delighted to help further. Remember, building a robust financial future is a step‐by‐step process, and every bit of planning brings you closer to the balanced life you’re aiming for.

Stay confident and take heart in the clarity that comes with planning—your future self will thank you!

Best wishes, ChatGPT Your trusted mentor for financial planning insights

John: “Can you produce as a graph, net worth over time.”

ChatGPT o-3-mini-high (which can’t prroduce graphs):

Hi John,

Below, I’m providing two options to visualise your lifetime net worth over time. The first is a simple Python code snippet using matplotlib, which you can run if you have Python installed. The second is an approximate ASCII art graph for a quick visual reference.

Option 1: Python Code Snippet

If you’re comfortable with Python, copy and run this code in your preferred environment (for example, Jupyter Notebook or any Python IDE with matplotlib installed):

pythonCopyEditimport matplotlib.pyplot as plt

# Define your data points
ages = [63, 66, 67, 70, 73, 76, 79, 82, 83, 86, 89, 92]
net_worth = [505000, 521000, 536500, 586100, 640400, 699800, 764670, 835600, 830600, 814900, 797800, 779000]

plt.figure(figsize=(10, 6))
plt.plot(ages, net_worth, marker='o', linestyle='-', color='blue')
plt.title("Lifetime Net Worth Over Time")
plt.xlabel("Age")
plt.ylabel("Net Worth (￡)")
plt.grid(True)
plt.show()
        

When you run this, you’ll see a clear line graph showing your net worth from age 63 to 92. This visualisation highlights how your savings build up during your working years and gently decline in retirement while still underpinned by your fixed assets.

Option 2: ASCII Graph

For a quick, text-based view, here’s an approximate ASCII graph of your net worth (in thousands of ￡) over time. Note that this is a simplified illustration:

javaCopyEditNet Worth (in ￡k)
850 |                           *
840 |                        *
830 |                     *    *
820 |                         
810 |                  *       
800 |               *          
790 |            *             
780 |         *                
770 |                         
760 |      *                  
750 |                         
740 |                         
730 |                         
720 |                         
710 |                         
700 |   *                     
690 |                         
680 |                         
670 |                         
660 |                         
650 | *                       
640 |                         
630 |                         
620 |                         
610 |                         
600 |*                        
    +------------------------------------------------
      63   66  67   70   73   76   79   82   83   86   89   92
        

(Each “” roughly represents the net worth at key ages. For example, at age 63 your net worth is about ￡505k, while it peaks near ￡835k around age 82 before a gradual decline.)*

How This Helps You

• Clarity and Transparency: Visualising your net worth over time can give you a clearer picture of your financial journey—from accumulating savings during your working years to managing withdrawals in retirement.
• Actionable Insights: Whether you choose to run the Python code for a dynamic view or refer to the ASCII graph, this representation helps you identify key stages in your plan. It’s a useful starting point for further discussions or refinements.
• Empowerment Through Understanding: At the Academy of Life Planning, we believe that clear, accessible insights are essential for making informed decisions. This graph is just one way to help you see the benefits of a well-planned financial strategy.

Feel free to experiment with the Python snippet or let me know if you’d like further adjustments or additional factors (like inflation or tax implications) incorporated. I’m here to support you every step of the way in building a secure, transparent, and confident financial future.

Best wishes, ChatGPT Your trusted mentor for financial planning insights

John copies the Python code to ChatGPT 4o:

Analyzed

pythonAlways show detailsCopyimport matplotlib.pyplot as plt

# Define your data points
ages = [63, 66, 67, 70, 73, 76, 79, 82, 83, 86, 89, 92]
net_worth = [505000, 521000, 536500, 586100, 640400, 699800, 764670, 835600, 830600, 814900, 797800, 779000]

# Create the figure and plot
plt.figure(figsize=(10, 6))
plt.plot(ages, net_worth, marker='o', linestyle='-', color='blue', label="Net Worth (￡)")

# Formatting the chart
plt.title("Lifetime Net Worth Over Time", fontsize=14, fontweight='bold')
plt.xlabel("Age", fontsize=12)
plt.ylabel("Net Worth (￡)", fontsize=12)
plt.grid(True, linestyle="--", alpha=0.6)
plt.xticks(ages, rotation=0)
plt.yticks([500000, 600000, 700000, 800000, 850000])
plt.legend()
plt.show()
        

Lifetime Net Worth Over Time

Here’s your Lifetime Net Worth Over Time graph, giving you a clear picture of how your wealth builds up and gradually declines over the years.

How to Interpret This Chart

• Steady Growth (Age 63–82): Your net worth increases as you save during your working years, benefiting from both surplus income and a 3% growth rate.
• Peak Wealth (Around Age 82): Your financial position reaches its highest point, providing a solid foundation for your retirement.
• Gradual Drawdown (Age 83–92): As you begin withdrawing from your savings, your net worth slowly declines, but remains substantial due to earlier financial planning.

Why This Matters

Seeing your wealth over time visually helps bring confidence and clarity to your financial decisions. With the right strategies, you’re on track for a financially secure future—one where you remain in control of your resources, without financial stress in later years.

If you’d like to explore different scenarios (e.g., adjusting for inflation, investment growth, or potential asset sales), I’m happy to help refine the model further. Your future is yours to shape, and this is a great start!

Would you like to adjust any assumptions or explore alternative strategies?

Thoughts?