After four years of losing ground under President Biden, retirement plans have made a big after-inflation comeback this year. That’s the conclusion of the new Unleash Prosperity study, “Reversal of Fortune: 401(k) Plan Returns Under Biden and Trump.”
Both equity and bond markets have delivered solid returns this year, and low inflation rates have preserved those nominal gains, equating to a real (inflation-adjusted) increase of over 15 percent to the average 401(k) retirement plan.
Investors’ experience this year stands in stark contrast to the prior four years under Mr. Biden. Although the average return on equities was robust from the first quarter of 2021 through the first quarter of 2025, that was only half the story.
The bond market had its worst four-year run in a century, burying savers in losses. The deadly combination of both 40-year-high inflation and the fastest rise in interest rates in just as long decimated everyone who their nest eggs in fixed-income assets.
Profligate government spending delivered this one-two punch to the bond market. The Biden administration and Congress effectively made permanent what should have been a one-time emergency level of federal spending during 2020, enshrining multi-trillion-dollar deficits into the budget through 2024.
Monetary policy only encouraged this runaway spending, saddling the nation with its worst inflation in four decades. That, in turn, prompted the Federal Reserve to drastically change course and quickly push up interest rates.
The Treasury’s voracious appetite for loanable funds combined with violent monetary moves produced a regional banking crisis in 2023, froze over the housing market, and crushed bond returns. In 2022, the average return on bonds was -17.8 percent, the worst annual return in a century, including the worst year of the Great Depression, 1932.
In the four years of 2021 through 2024, the cumulative average bond return was -19.7 percent. This is essential to keep in mind when discussing retirement vehicles like 401(k) plans because savers tend to plow an ever-growing percentage of their nest egg into fixed-income assets as they near retirement. For those who did during those years, the result was painful.
In nominal terms, the average 401(k) balance rose a paltry $3,500 during the Biden presidency, a gain of just 2.6 percent. Adjusted for inflation, this translated into a staggering loss of about $24,800, or -15.3 percent.
By contrast, savers were rewarded handsomely during the first Trump administration. From 2017 through 2020, the average 401(k) balance jumped about 29.7 percent, or approximately $30,700. In real terms, that was still a healthy increase of 19.2 percent, or approximately $26,200.
For the average person saving for retirement, that means the real losses suffered during the Biden administration wiped out 94.8 percent of the gains from the first Trump term. Fortunately, the stellar returns in 2025 have righted the ship.
From the first quarter of this year through the third quarter, the average 401(k) has risen sharply by $23,200, or about 16.9 percent. Thanks to relatively low inflation rates, this has translated into a real increase of about $20,700, or 15.1 percent.
And the gains are not accruing only to the wealthy or high-income earners. Roughly 70 million Americans have 401(k) plans, and 150 million Americans have access to either a tax-preferred retirement account or a pension plan.
And those pension plans have also done extraordinarily well this year after experiencing significant losses from 2021 through 2024. During the Biden years, real pension plan balances got walloped for the same reasons that 401(k) balances did, resulting in real losses of $2.7 trillion, or about -8.2 percent.
Conversely, from the first quarter of this year through the third quarter, pension plan balances have seen real increases of about $2.7 trillion, or 9.0 percent, reversing all the losses from the prior four years in a matter of months.
The winning combination that has delivered these results for savers is solid average returns in both equity and bond markets, along with relatively low and stable interest rates and inflation rates. As Treasury Secretary Scott Bessent recently noted, investors in US Treasuries are getting their best returns in five years.
With the introduction of “Trump accounts,” even young Americans will get a slice of the pie and benefit from healthy market returns. What a difference a President and pro-growth policies can make.
E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.