After enduring four challenging years of inflation and declining bond markets that took a toll on Americans’ retirement savings, 2025 brought a significant recovery. Retirement accounts have largely bounced back, highlighting the profound impact of policy changes on workers’ nest eggs.

A recent study by E.J. Antoni, a senior fellow at the conservative think tank Unleash Prosperity, reveals that the average 401(k) balance surged by approximately $23,200, equating to a 16.9% increase from the first to the third quarter of 2025.

Even after accounting for inflation, this increase remained substantial, amounting to about $20,700, or a 15.1% rise.

This rebound followed a difficult period from early 2021 through the beginning of 2025, during which the average 401(k) saw minimal nominal growth and a significant decline when adjusted for inflation, according to the study.

Antoni explained in a phone interview with The Post on Wednesday that the positive shift this year can be attributed to a marked slowdown in inflation and a notable recovery in bond markets.

“The previous one-two punch that had knocked out people’s retirement accounts now turned into a one-two blessing, if you will,” he said.

Antoni credited President Trump’s policies for the turnaround, saying: “This is a total reversal as the Trump administration unleashes DOGE and reduces government spending and therefore borrowing as they engage in tax and regulatory reform, as they promote pro-energy policies.”

Trump, a Republican, has focused on 401(k) accounts throughout his terms in office, signing an executive order in August that would make it easier to include alternative assets like cryptocurrencies and real estate in retirement plans.

“My Administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement,” he said in a statement at the time.

CRUSHING CONDITIONS FOR BONDS

Under former President Joe Biden, a Democrat, cumulative inflation ran 21.2% over four years, eroding purchasing power and forcing the Federal Reserve into its fastest rate-hiking cycle in decades, Antoni’s report noted.

Those rate increases crushed bonds — a core holding in retirement portfolios — delivering what the economist described as the worst four-year run for average bond returns in a century.

For savers nearing retirement, the damage was especially severe.

“As people get closer and closer to retirement, they allocate more and more of their savings into fixed income assets,” said Antoni, who’s also chief economist at the Heritage Foundation.

“Ironically, the people who thought they were in the safest position were the ones who suffered the most.”

While stocks posted solid headline gains during much of Biden’s term, inflation quietly hollowed them out. Antoni noted that roughly a third of average equity returns during those four years were from inflation.

“It’s not just how big is my retirement account — it’s what can my retirement account buy me after I finish working,” he said.

The past year saw markedly different economic conditions. Inflation has cooled, interest rates have stabilized and both stocks and bonds have delivered positive real returns.

The study found aggregate 401(k) balances topped $10 trillion for the first time, while pension plan assets surged, as well, in the third quarter of 2025.

Total pension balances rose to about $33.2 trillion by the third quarter of 2025 — an inflation-adjusted increase of roughly $2.7 trillion, or 9%, that mostly offset losses from the prior four-year period, according to Antoni’s report.

The simultaneous damage to both stocks and bonds during the earlier period was historically rare, he said.

“There are literally only four years where you have both average bond returns and average equity returns negative over the last century,” Antoni observed.

“The worst of those was 2022.”

Despite the strong comeback, many savers are still not fully whole. Antoni’s analysis shows that the real losses suffered during the Biden years wiped out nearly 95% of the gains from Trump’s first term.

Antoni noted that people who thought $1 million was enough for retirement now realize they need $1.2 to $1.3 million due to the higher cost of living.

The gains in 2025 have dramatically reduced that gap — but not eliminated it entirely.

“I think people probably feel like they’ve been spinning their wheels,” Antoni said, noting that many people continued contributing to their plans throughout the period he studied, yet still lost ground after inflation.

‘BAD FISCAL POLICY’ BLAMED

He attributed the reversal largely to changes in fiscal and monetary conditions, arguing that slowing government spending and borrowing have eased inflation pressures and improved market stability.

“Failed monetary policy is a big component of the business cycle we’re seeing right now, and the reason we got that bad monetary policy was bad fiscal policy,” the economist said, taking a dig at the Biden administration.

He cautioned that the gains are not guaranteed to last if Washington returns to heavy spending, aggressive regulation or policies that drive up energy costs.

“Returning to those failed policies would return us to the negative effects we saw the first time,” Antoni said.

Inflation, he added, remains the biggest long-term threat to retirement security.

“When you have inflation, it is instantly diminishing the value of your dollar, including all the dollars you have in retirement,” Antoni said.

Still, he does not see signs of the kind of runaway price increases that would quickly wipe out the 2025 gains.

SAVINGS SAID TO REMAIN KEY

Looking ahead, he said the single most important factor for individual savers remains how much they are able to put away, even as policy decisions shape the broader environment.

“The number-one thing that drives your 401(k) balance is how much you’re saving,” Antoni said, adding that market returns ultimately depend on whether government policies “get out of the private sector’s way.”

For now, the economist said, the data show meaningful progress — and a stark reminder of how quickly retirement fortunes can rise or fall.

“We’ve made fabulous progress this year,” he said.

“But what the data also tell us is that we still have more to go. We still have some lost ground before people are made whole.”