Finally, some good news for American savers battered by years of economic turbulence!
According to the New York Post, after a punishing period of losses driven by high inflation and crumbling bond markets from the first quarter of 2021 to the first quarter of 2025, retirement accounts staged a remarkable recovery in 2025, with average 401(k) balances climbing by roughly $23,200, or 16.9%, through the third quarter, though full restoration of purchasing power remains elusive.
Looking back, the stretch from early 2021 to early 2025 was a brutal slog for retirement nest eggs. Under the Biden administration, cumulative inflation soared to 21.2%, gutting purchasing power, while the Federal Reserve’s rapid rate hikes—the fastest in decades—tanked bond markets, a critical piece of most portfolios.
That bond market collapse was no small hiccup; it marked the worst four-year performance for average bond returns in a century. Savers close to retirement, who often shift toward fixed-income assets for safety, took the hardest hit.
Even stock gains during those years were deceptive, with about a third of equity growth tied to inflation rather than genuine value increase. Inflation-adjusted, the average 401(k) balance barely budged nominally and plummeted in real terms.
Fast forward to 2025, and the tide turned with a slowdown in inflation and a robust bond market rebound. After adjusting for inflation, 401(k) balances still gained about $20,700, or 15.1%, signaling a meaningful step forward.
Policy changes under President Trump, including cuts to government spending and borrowing, alongside tax and regulatory overhauls, were hailed as key drivers of this turnaround. Pro-energy initiatives and an executive order signed in August 2025 to allow alternative assets like cryptocurrencies and real estate in retirement plans added to the momentum.
By the third quarter of 2025, aggregate 401(k) balances crossed the $10 trillion mark for the first time. Total pension assets also swelled to around $33.2 trillion, with a real increase of $2.7 trillion, or 9%, after inflation adjustments, offsetting much of the prior damage.
Cooler inflation, stable interest rates, and positive returns for both stocks and bonds in 2025 created a favorable environment. As E.J. Antoni of Unleash Prosperity think tank noted, “We’ve made fabulous progress this year. But we still have more ground to recover before people are fully made whole” (in a phone interview). While encouraging, this recovery isn’t a full fix for savers still reeling.
Antoni also pointed out the lingering sting of past policies, saying, “It’s not just how big your retirement account is — it’s what that account can buy after you stop working.” That hits hard when inflation during the Biden years erased nearly 95% of gains from Trump’s first term, adjusted for real value.
Now, savers who once pegged $1 million as their retirement goal estimate they need $1.2 million to $1.3 million to keep up with rising costs. Despite the 2025 upswing, many haven’t regained their lost ground in purchasing power.
Inflation remains the stealthy villain threatening long-term security for retirement funds. Improved fiscal and monetary conditions in 2025, with restrained spending, have eased pressures, but a reversal to heavy-handed policies could undo this progress faster than a market crash.
Historically rare, the simultaneous nosedive of stocks and bonds under Biden—with the worst year being 2022—showed just how vulnerable portfolios can be. Only four times in the last century have both asset classes tanked together, a sobering reminder of policy’s ripple effects.
While government decisions shape the economic landscape, individual savings habits are still the bedrock of retirement success. Savers must prioritize consistent contributions, no matter the market’s mood swings or policy pendulum. The 2025 gains are a welcome relief, but the journey to full recovery continues. Let’s hope sound fiscal stewardship keeps this momentum alive, rather than letting misguided spending or regulatory overreach snatch victory from the jaws of progress.