OPINION:
Americans can breathe a major sigh of relief as they see how well their retirement accounts did in 2025. After suffering through four years of inflationary Biden-era policies that hammered 401(k)s and pension plans, those accounts made tremendous gains last year. Better still, that progress is set to continue this year.
A new Unleash Prosperity study estimates that Americans’ retirement accounts have surged higher in the first year of President Trump’s second term, a clear reversal from the underperformance experienced during the Biden administration.
According to the study, from the first through the third quarter of 2025, the average 401(k) balance rose from $137,300 to $160,500. That’s an increase of over $23,000, or nearly 17%. Total 401(k) balances now exceed $10 trillion for the first time, indicating a boom in retirement plans through the year.
Even after adjusting for inflation, the average 401(k) still climbed almost $21,000, or more than 15%. This represents not just a mere increase on paper, but an increase in what people can buy with their retirement savings. It’s the opposite of what happened under former President Biden.
Over those four years, 401(k) accounts experienced slow growth on paper, only rising about $3,500 or 2.6%. However, cumulative inflation of over 21% from 2021 through 2024 eroded gains, effectively cutting $2.7 trillion from retirement plans. In real (inflation-adjusted) terms, the average 401(k) experienced a net loss of about $24,800, or 15.3%.
The average equity return during the Biden administration was 13.5% per year, but one-third of this increase was just inflation. That means stock prices, and therefore retirement accounts, were not just rising because companies were worth more, but because the dollar lost value. During Mr. Trump’s second term, the average annualized equity return is approximately 19%, with only one-fifth of that attributable to inflation.
Stocks aren’t the only investment that declined over Biden’s administration. Bonds were hit, too. Retirement portfolios among younger investors typically assume greater risk (stocks) while older investors prefer safer investments (bonds and Treasuries). Under Mr. Biden, Americans experienced the worst four-year bond market in a century, disproportionately harming older, risk-averse Americans with bond-heavy portfolios.
As massive government deficits rapidly pushed up interest rates to 5.5% and inflation rates to 9%, bond prices fell, leading to record losses of almost 20% in just four years. People nearing retirement who were relying on the supposed safety of bonds got crushed.
However, in less than a year, Mr. Trump has made headway in reducing inflation, normalizing interest rates, and growing the economy, thereby fostering growth in both stock and bond returns. These improvements extend to pension plans as well, whose assets are up approximately $2.7 trillion, or 9% this year in real terms.
It was public policy that both benefited retirement accounts this year with Mr. Trump and that devastated those accounts under Mr. Biden. For example, multi-trillion-dollar spending packages like Mr. Biden’s Inflation Reduction Act — more accurately the Inflation Reacceleration Act — contributed to inflation and interest rates shooting higher, which did real damage to people’s retirement savings.
Mr. Trump has made progress in repairing the severe fiscal damage from the Biden years by reducing federal spending and improving economic conditions through energy, tax, and regulatory reform. He has also expanded investment opportunities for savers.
For example, his August 2025 executive order on Alternative Assets directs the Labor Department and SEC to reduce regulatory barriers and ease access, making it easier for 401(k) plans to include private equity, real estate, infrastructure, and digital assets. Higher returns and portfolio diversification are boons for retirement plans.
Mr. Trump’s efforts to improve economic conditions for Americans, specifically by reducing inflation — and thereby prompting lower rates — have contributed significantly to capital market stability and produced the best bond market returns since his first term.
Additionally, Mr. Trump has pursued pro-growth policies that encourage work and investment. Provisions of the One Big Beautiful Bill Act, like depreciation expensing or no tax on overtime pay, will boost national economic growth and incomes so people can save more for retirement — and so those savings can grow faster.
As these and other policies take effect in 2026, things will look very bright indeed, especially for Americans’ retirement accounts.
• Nicole Huyer is a senior research associate in The Heritage Foundation’s Thomas A. Roe Institute for Economic Policy Studies.
Please read our comment policy before commenting.