Inflation cuts $2.5T from retirement plans despite growth in retirement accounts, says expert

EXCLUSIVE: The Biden-Harris administration's economic policies have had a detrimental impact on senior citizens' retirement plans, according to a new report led by economist E.J. Antoni.

The report, shared first with FOX Business, found that the average 401(k) plan grew by $11,000 from 2021 to 2024, but when adjusted for inflation, it represents a $12,000 (9.2%) loss.

Researchers found that retirement plan balances also increased by nearly $30 trillion by the third quarter of 2024. But after adjusting for inflation, the retirement plans are worth roughly $27 trillion, a $2.5 trillion real loss.

 HIGH INFLATION IS CHANGING THE WAY AMERICANS RETIRE

Retirement accounts with significant bond allocations suffered the most, with bonds seeing their worst returns since 1928, Antoni said. As a result, many nearing retirement will be forced to work an additional six years to offset the inflation-driven losses.

"Probably the biggest takeaway is the fact that people get caught up looking at the stock market and thinking that that's an accurate representation of every kind of investment, including people's retirement, and unfortunately, that's just not the case," Antoni told Fox Business in an interview.

Antoni said that since many people have a significant portion of their retirement savings in fixed-income assets, which have performed very poorly over the last four years, many of the gains in the stock market have been offset by losses in these assets. With the added impact of inflation, people who believed they were making smart investment choices now find themselves at a loss.

INFLATION IS UP 20% SINCE BIDEN TOOK OFFICE

"The biggest policy mistake of the Biden-Harris administration regarding the impact on seniors' cost of living has been the insane amount of runaway, profligate federal spending," Antoni said. "This is what gave us 40-year-high inflation. That is what gave us this violent change in interest rates, and that's what gave us this tremendous deterioration in the bond market. So, all of these things have combined to really deliver a kind of one-two knockout punch."

The U.S. national debt has surged dramatically, research showed, with Treasury estimates projecting it will exceed $36.2 trillion by the end of the calendar year.

Additionally, the Biden-Harris administration has significantly reduced the Treasury's cash reserves, known as the Treasury General Account, by about $1 trillion since taking office, Antoni said.

"So, not only do you have the overspending in terms of the increased debt, you have the overspending in terms of the decreased saving," he said. "So, [when] you put all this together, the government has essentially overspent by $9 trillion in four years. That's a quarter of the entire federal debt. So, I think that kind of puts in perspective when we talk about the spending problem just how bad it has gotten under the Biden-Harris administration."

VP KAMALA HARRIS RESPONDS TO WHY MORE AMERICANS TRUST TRUMP ON THE ECONOMY

Researchers concluded that high levels of federal spending have led to an inflation shock that has diminished the real value of people's savings. As the government continues to run multitrillion annual deficits, the rising cost of interest payments on the federal debt could eventually limit funding for other programs, including Social Security. Even if this does not happen, the expense of servicing the debt is growing much faster than national income or federal tax revenue.

This creates a cycle in which increased borrowing leads to higher interest payments, adding more inflationary pressure to the economy.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

"Reductions in government spending would reduce that inflationary pressure, benefiting savers and retirees. Sufficient spending restraint could also put the deficit and federal debt on a sustainable trajectory, relative to economic growth, reducing the problems related to the cost of servicing the debt," the report said.

In May, a survey published by Nationwide found that a growing number of older Americans are delaying or abandoning their retirement plans as they continue to battle chronic inflation.

The uncertain economic landscape has many Americans reconsidering whether retirement is a realistic goal. More than one-quarter of all non-retired investors said they would likely be forced to return to the workforce at some point due to inadequate savings if they were to retire within the next 12 months, while 19% doubt that they will ever save up enough money to retire.

An additional 19% said they will retire later than planned because of inflation.

FOX Business' Megan Henney contributed to this report.