Planned Obsolescence: Financial Advice for Workers at Risk of AI Replacement

“Hi Claude. Please help me plan for a career change before you replace me.”

Depending on who you talk to, artificial intelligence ranges from an employment opportunity to the single-biggest threat to the job market in history. Workers who have leaned into the technology have often gained efficiencies and proven themselves more valuable than their (relatively) Luddite peers. At the same time, there have been some alarming job cuts, even at tech companies, attributable to AI. Anthropic CEO Dario Amodei has repeatedly warned about the myriad possible threats AI poses to humanity, prognosticating a 50% reduction in entry-level white-collar jobs in less than five years. 

With so much in question about the future of work, some advisors are encouraging clients to squirrel away extra savings and diversify their portfolios — or even their skillsets. “Our clients are heavily exposed to tech through their careers,” said Jacob Tally, financial advisor at Seattle-based Prospero Wealth. They’re “not only collecting salary from a tech company — they’re also getting [restricted stock units] and stock options. … They already feel too exposed to tech and AI.”

Hit Me Hard and Microsoft

The issue is in plain sight in Washington state, where Microsoft is headquartered. Over the past several years, the company has cut tens of thousands of jobs, and it recently dangled a buyout offer to 60,000 workers. Like other tech companies, the financial pressure it faces to build its AI capabilities is reportedly making it consider cost savings elsewhere, including headcount. Some of Prospero Wealth’s clients were affected by Microsoft’s cuts as well as by reductions at other tech companies and startups, Tally said. One former tech worker who’s been in the job market for months is having to consider lifestyle changes, as she may need to start pursuing positions with lower income, he said. Another, who’s worried about the future of his job, is weighing a move to Mexico as a way to reduce his cost of living. Depending on his age when he would relocate, that strategy could work, Tally said.

A lot of clients have been honing their AI skills by using personal ChatGPT or Claude accounts, he said. Some have side hustles or are in the process of building products or businesses. “There’s a lot of uncertainty, and a lot of clients are concerned about what this means for their situations,” Tally said. It’s a particularly hard time for tech workers in their 50s, given that they have plenty of working years ahead but can be derailed by a layoff, he noted. “For these clients, we’ll pressure-test retirement plans built around different spending habits or an earlier-than-expected retirement.” And while it’s not ideal to spend retirement assets early, the IRS Rule of 55 allows people who separate from jobs during the year they turn 55 or older to take 401(k) distributions without the usual 10% early withdrawal penalty, he noted.

The Call Is Coming From Inside the House

Amodei’s grim forecast contrasts with many other assessments of AI’s impact on labor — but because his and other warnings are coming from the industry that develops the technology, it is hard to ignore. Still, the wider consensus is that AI will almost certainly change the nature of work:

• Faculty at the Yale School of Management have noted an outsized impact on young workers, with the 6% unemployment figure for recent grads having risen at twice the rate for the broader labor force over the past four years. And it’s hard for teachers to stay on top of AI models that, in many cases, students are often more familiar with, they wrote.

• AI use has coincided with a reduction in monthly payroll growth by an estimated 16,000 jobs over a year and unemployment rising by 0.1 percentage points, per a report earlier this year from Goldman Sachs. The effect has been largest for jobs like telephone operators and bill collectors, though in categories where AI “augments” what workers do, employment may be trending upward.
• An estimated 50-55% of US jobs may be changed by AI, with the technology potentially automating many of the tasks in over 40% of jobs in the next several years, according to Boston Consulting Group. Jobs where human judgment is critical — the report cites software engineers as an example — may see less automation in their workflow.
• Contrasting the dire warnings, AI may be boosting pay and employment rates, PwC found. The professional services company points to a “two-track labor market” in which AI expertise is linked to 42% higher wage growth since 2021 in some jobs but is simultaneously lowering the barrier for entry in roles where AI has made it easier for nonexperts to break in.

“Skills are changing more than twice as fast in the most AI-exposed occupations compared to those least exposed,” PwC US Chief AI Officer Dan Priest said in comments to Advisor Upside. “In the US, we’re also seeing this shift at the entry level, where AI-exposed roles are seven times more likely to require skills traditionally associated with more senior positions, like leadership and strategic thinking.” 

His advice to workers: Get your hands dirty with AI now. One doesn’t need to become an expert, but understanding it can complement skills and help create opportunities, he said. “And don’t stop at desktop-level productivity,” he said. “Workers should be thinking about how common agents can benefit the team and the end-to-end workflows.”

Seeking a Friend for the End of the Work. A lot of clients want to know what to do, advisors said. Aside from leaning into AI and considering extra job training, making sure portfolios are diversified is prudent. Having additional cash on hand may also be wise, perhaps enough for nine months to a year of expenses for those worried about being laid off, said Alvin Carlos, an advisor at District Capital Management. “Plan as if your peak earning years might be shorter than you assumed,” he said.

Tech workers are among the clients most worried about a potential AI bubble and are asking about portfolio diversification, said Alex Caswell, founder and CEO of Wealth Script Advisors. “A lot of them are also thinking about how to save money in order to be able to take sabbaticals or make career pivots,” he said. “The people closest to AI are the ones that feel the most helpless about where the future is going, to be frank.”

They’ll Be Back. AI can’t help clients as well as advisors can with the emotional aspects of career risks they face, which helps show the value they will continue to provide, Tally said. “We’re helping them not only with the financial side of it but the behavioral side of it as well.”

For those who recently lost jobs due to automation, there is a sliver of good news. Nearly one in five laid-off US workers have been asked by employers to return, including 24% of people ages 18 to 24, according to results of a recent survey by workforce data and consulting firm SHL of 2,000 people. While less than 10% said they’d never consider going back, over half said they would, but they’d want substantially higher pay for returning. Take that, robots.