When a woman recently told me that her favorite use of AI is for financial advice, I panicked. As a retirement economist, my first reaction was one of self-pity: now I understand how doctors feel when people turn to AI for medical advice.

I went home and tried it. It wasn't bad; the AI ​​provided clear and engaging explanations of common concepts about saving and investing. It was like a moderately efficient financial planner, but without the personal touch. Perhaps that's better than nothing, and it's likely to become more widespread as more brokerage firms offer AI-powered advisors to their less affluent clients.

But this approach has fundamental weaknesses. With most Americans unable to answer basic questions about financial markets, and only about half believing that owning a large number of stocks is safer than owning a few, it seemed appropriate to offer a simplified introductory guide. The "principles of finance" still explain almost everything, but some terminology might need further clarification.

One problem I noticed with the chatbot I used was that it often offered advice based on flawed logic. Most of the time, this wasn't a major concern, as many people are more interested in knowing what to do than in the details. However, this flawed logic reveals the limitations of an AI-powered financial advisor when an unexpected personal or financial event occurs, which is inevitable.

Retirement investment advice is plentiful, as the number and variety of assets continue to grow. Yet, transparency and understanding are often lacking. This guide aims to help you understand how to save and invest in this new market, especially for those relying on AI as a financial advisor.

Know what you're investing in. Is it an equity fund that includes publicly traded companies that track the market? A municipal bond fund? Or commodities (not my preferred choice)?

It's crucial not to blindly trust any investment fund without knowing its exact composition. Once you know, ensure that all assets within it have a market price.

You don't need to track the price daily or even name every single security you own, but you must understand the nature of the assets in your portfolio. Just as you should know where your food comes from, you should know what your investment portfolio is made of.