President Donald Trump gave a nod to the success of 401ks as he hailed the “Great American Comeback” during Tuesday’s State of the Union address.

The fact-checkers come out in full force for any State of the Union speech, so it’s little surprise that in today’s hyper-partisan environment, some seemed a little more eager to challenge many of the generalized claims made Tuesday night.

While Democrats are reeling from an awful three-day period this week that saw the Iowa Caucus debacle, Trump’s highest-yet poll approval rating, the campaign-style State of the Union address and the Senate acquitting the president on both articles of impeachment on Wednesday, Trump’s chances of re-election seem stronger than ever.

As for 401ks, here’s what Trump said in the opening minutes of the 78-minute speech Tuesday night:

“Since my election, U.S. stock markets have soared 70%, adding more than $12 trillion to our nation’s wealth, transcending anything anyone believed was possible. This is a record. It is something that every country in the world is looking up to. They admire. Consumer confidence has just reached amazing new highs.

“All of those millions of people with 401ks and pensions are doing far better than they have ever done before with increases of 60, 70, 80, 90 and 100%, and even more.”

And here’s what some of the “fact-checkers” had to say:

“As for the idea that 401ks are doing better than ever before, it is nonsense. We don’t have to go back very far at all to find better. Assuming that 401ks are 100% invested in an S&P 500 tracker fund, which is the implicit assumption, there have been periods of three years and three months (the period that has elapsed since Trump was elected) under each of his three immediate predecessors when the stock market did even better. The best period to invest started with the bottom of the market in 2009 after the crisis, but amazingly the latter Obama years had another rally that was slightly better than the rally of the last three years.” – John Authers in Bloomberg Opinion, Feb. 4.

“Trump often boasts that the value of 401k retirement accounts has skyrocketed during his presidency, even though there’s no evidence of such huge gains and even though the Census Bureau reports only 32% of Americans are saving for retirement with such plans. An analysis by Fidelity Investments showed the average 401k balance increased less than 1% when comparing the first quarters of 2018 and 2019.” – Glenn Kessler, Salvador Rizzo and Sarah Cahlan in The Washington Post, Feb. 4.

Some context helps here. The cited Q1 2019 Fidelity analysis of their 401k client participants did indeed find that year over year, the average 401k balance was up only 1% in Q1 2019 compared to Q1 2018.

The same analysis found the average 401k balance rose 8%, from $95,600 at the end of 2018 to $103,700 by the end of the first quarter of 2019, primarily due to the strong returns in the first quarter last year.

Generally speaking, the entire past decade was an impressive one for 401k balances. Fidelity’s analysis also revealed that for those who remained invested in their 401k in the decade following the Great Recession of 2008, average balances went from $52,600 to $297,700, a whopping 466% increase.

Stock market way up, but not by 70%

As for Trump’s “U.S. stock markets have soared 70%” since his election claim during the speech, it is a bit exaggerated.

NPR Chief Economics Correspondent Scott Horsley said that while the stock market has indeed enjoyed big gains since the 2016 election, “The S&P 500 index has risen 54%, and the Dow Jones Industrial Average has climbed 57%.”

Authers, in his Bloomberg Opinion piece, echoed the 54% S&P 500 growth for what he called “by far the most widely used measure of the U.S. stock market,” and added that it’s 64% on a total return basis.

“These numbers are very good. He exaggerated them, but not by all that much,” Auther said. “And presumably there must be someone out there who took some extremely risky positions in their 401k and managed to double their money in barely over three years, but they needed to gain about 25% a year to do so, so it is unlikely they had many bonds in their portfolio.”

Authers said he will “happily admit” returns under Trump have been much stronger than he thought likely (and “undeniably impressive”) because he started his term with stocks already expensive while Presidents Clinton and Obama both inherited cheap stock markets.

Trump 401k tweets, comments

During his term, President Trump has frequently tweeted about 401ks as a proxy for overall economic health, and told a 2020 campaign rally audience in New Hampshire last August the following:

“If for some reason I wouldn’t have won the [2016] election, these markets would have crashed. That’ll happen even more so in 2020. See, the bottom line is… You have no choice but to vote for me because your 401k, everything is going to be down the tubes. So, whether you love me or hate me, you’ve got to vote for me.”

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