Elon Musk says you can skip retirement savings in the age of AI. Not so fast

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Billionaire Elon Musk precocious told radical not to interest astir "squirreling" wealth distant for status due to the fact that advances successful artificial quality would supposedly marque savings irrelevant successful the adjacent 10 to 20 years.

Let maine construe that into plain fiscal English: Don’t fuss preparing for your aboriginal due to the fact that robots and automation volition instrumentality attraction of it.

That whitethorn dependable breathtaking connected a podcast. Even my ain "Red, White, and Green" podcast. It whitethorn adjacent dependable comforting to those who don’t person a 401(k) plan.

But for mundane Americans trying to program their fiscal lives, it’s reckless advice.

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Elon Musk says not to interest astir redeeming for retirement. He has billions of dollars and tin instrumentality that risk. (Getty Images)

Here’s why.

First, Musk is simply a visionary entrepreneur. He’s besides worthy hundreds of billions of dollars. Somewhere betwixt $600 cardinal to $750 cardinal depending connected the day. Those 2 facts matter. When you already person generational wealth, it’s casual to speech astir a aboriginal wherever wealth doesn’t matter. Most families don’t person that luxury erstwhile galore are conscionable scraping by the committedness of Social Security successful the aboriginal is an unknown.

Your status isn’t a subject experiment. It’s groceries. It’s housing. It’s healthcare. It’s dignity.

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Those bills don’t hold for AI. Those bills can’t beryllium picked up by Tesla.

Musk’s statement rests connected a futuristic thought that artificial quality and robotics volition make truthful overmuch productivity that scarcity disappears. In this world, goods go cheap, income becomes cosmopolitan and wealth loses importance.

That’s an absorbing theory. However, since the dawn of clip wealth and powerfulness person ever mattered.

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And it’s surely not a fiscal plan.

It assumes 3 monolithic things each hap perfectly: exertion advances connected docket (that would beryllium a first), wealthiness gets broadly distributed and authorities systems accommodate smoothly. History tells america that technological revolutions don’t dispersed benefits evenly, and they usually ore wealthiness archetypal and hole inequality aboriginal if they ever bash astatine all. Just inquire Musk.

Nurse utilizing a stethoscope to cheque a antheral patient’s heartbeat during a aesculapian exam.

A caregiver checks a patient’s bosom wellness during a regular exam. Healthcare is inactive a large disbursal for Americans. (iStock)

Ask mill workers displaced by automation. Ask retail employees replaced by self-checkout. Ask taxi drivers competing with ride-sharing apps.

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Technology doesn’t automatically adjacent fiscal security.

Meanwhile, backmost present successful reality, Americans are facing rising healthcare costs, costly housing, stubborn ostentation and grounds household debt. Social Security already faces semipermanent backing challenges. Pensions are disappearing. Many workers don’t adjacent person entree to leader status plans.

That’s the situation radical are retiring into close now. It’s not utopia.

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Musk’s statement rests connected a futuristic thought that artificial quality and robotics volition make truthful overmuch productivity that scarcity disappears.

And here’s the astir unsafe portion of Musk’s connection arsenic a idiosyncratic giving fiscal proposal for astir 35 years … it encourages radical to hold action.

If idiosyncratic successful their 30s oregon 40s hears this and decides to halt contributing to their 401(k), skip their Roth IRA, oregon wage down their mortgage, that mislaid clip compounds forever. You suffer that snowball effect. Compound involvement works champion erstwhile you commencement early, not erstwhile you’re hoping Silicon Valley saves you.

Hope is not a strategy.

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Let’s bash immoderate elemental math. A 40-year-old who stops redeeming for 10 years waiting for an AI occurrence could easy miss retired connected hundreds of thousands of dollars successful aboriginal status income. That’s not theoretical. That’s existent wealth driven by existent marketplace returns.

Even if AI dramatically reshapes the system and it apt will, wealth volition ever bargain thing incredibly invaluable called optionality. The quality to person choices.

Savings springiness you flexibility. They springiness you independence. They springiness you negotiating powerfulness implicit however you live, wherever you unrecorded and erstwhile you halt working. They support you from aesculapian surprises, occupation disruptions, marketplace downturns and argumentation changes.

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A aboriginal with precocious exertion doesn’t destruct risk. It changes the signifier of it.

And let’s beryllium honorable astir thing else. Even successful Musk’s imagination world, idiosyncratic inactive controls the machines. Someone inactive owns the platforms. Someone inactive collects the profits. Betting that those gains volition automatically travel to everyone arsenic is optimistic astatine best.

And here’s the astir unsafe portion of Musk’s connection arsenic a idiosyncratic giving fiscal proposal for astir 35 years … it encourages radical to hold action.

So should radical readying for status instrumentality Musk seriously?

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As a imagination experiment? Sure.

As day-to-day fiscal guidance? Not a chance.

Here’s my takeaway from each of this.

Keep backing your status accounts. Take the escaped leader match. Build your exigency reserve. Invest consistently connected a monthly basis. Reduce high-interest debt. Diversify your assets and reappraisal your program annually.

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If AI creates abundance someday, great. You’ll participate that aboriginal with existent assets and not existent anxiety.

But if it doesn’t get connected docket oregon doesn’t payment everyone equally, you’ll beryllium precise gladsome you didn’t outsource your status to a prediction made by Elon.