The average 401(k) plan is down $34,000, or 25%, in 2022
In a New York Post Op-Ed, economists at The Heritage Foundation blame ‘Bidenflation’ for the $2.1 trillion hit to retirement accounts.
Taking aim at what it calls “Bidenflation,” The New York Post on Monday claimed that 401(k) plans have suffered $2.1 trillion in losses this year — the result of seven straight months of 8%+ inflation. And there’s still two-and-a-half months left in 2022.
“The average 401(k) plan had over $135,000 at the start of this year,” wrote Stephen Moore and E.J. Antoni, a pair of economists at The Heritage Foundation, a conservative research and educational institute that recently completed an analysis of how the highest inflation rate in nearly 40 years has impacted Americans’ retirement funds. “Today, those assets have shrunk on average to about $101,000. In other words, the average 401(k) plan is down about $34,000 — more than 25% in less than one year!”
Pension funds are down, too. At the beginning of 2022, pensions in the United States have $27.8 trillion in assets, Moore and Antoni noted. That figure has fallen to below $24 trillion — a drop of about 15%.
Related: 95% of 401(k) participants have stayed the course in 2022 (despite inflation)
“Many union and government pension funds were already facing financial shortfalls to be able to pay promised benefits,” the economists wrote. “The combination of high inflation and a bear market in stocks means insolvency is a real threat. Some may need bailouts or will have to sharply cut promised benefits.”
Moore and Antoni pointed to the major stock indices — the Dow Jones Industrial Average, NASDAQ, and S&P 500 — as being “way down” since Biden took office. Take into account inflation, and those negative returns tumble another 13%.
“Inflation also hurts returns from bonds — which typically account for between 20% and 40% of retirement funds,” they added. “That is because, as we are now seeing, higher inflation means higher interest rates, which lower the value of bonds you own.”
“The S&P 500 index rose 166% over the eight years Obama was in office,” according to 401(k) Specialist magazine. “And it climbed another 67.8% during Trump’s four years. But since Biden took office, the S&P 500 was down 3.4% at the close of the market on Oct. 13, and down 23% for the year. The Dow Jones Industrial Average was down 2.9% since Biden took office. For the year, the Dow had dropped 17.3% as of Oct. 13. The NASDAQ has been hit the hardest, down 19.3% since Biden took office and a staggering 31.9% so far this year.”