President Donald Trump has signed an executive order to broaden retirement investment options by allowing 401(k) accounts to include “alternative assets.” These could range from private equity funds to cryptos, moving beyond the traditional mix of stocks, bonds, and other standard holdings.
The order, signed last Thursday, instructs the Labor Department and other agencies to revise the rules that define what qualifies as an eligible 401(k) asset. If implemented, this change could open a new market for the $5 trillion private equity sector, which has long sought access to American retirement funds.
Currently, most employer-sponsored retirement plans—401(k)s and 403(b)s (used mainly by educators)—stick to predictable investments such as stocks, bonds, and occasionally commodities like gold. Introducing alternatives could attract savers looking for protection from market volatility or the possibility of higher returns.
Still, experts caution that these options also bring higher risks, less day-to-day transparency, and potentially greater costs. They can also be more complex for the average saver to understand.
The risks vary depending on the asset. Private equity, for instance, invests in privately held companies, making it difficult to track performance in real time. Cryptos, while easier to price, are known for sharp swings in value.
Past performance shows both promise and risk. For example, Bitcoin, in 2022, fell 65%, while the S&P 500 dropped 19%. However, in 2024, it surged 135% compared to the S&P 500’s 24% gain.
Private equities, on the other hand, produced an average annual return of 13.5% over the past decade, compared with 1.9% for bonds and 9.7% for stocks. Still, these higher returns often come with steeper management fees, as private deals involve travel, negotiations, and legal work costs ultimately passed along to investors.
Employers, who are bound by the Employee Retirement Income Security Act (ERISA) of 1974 to act in their workers’ best interests, may hesitate to add these options despite the rule change.
For now, the timeline for implementation remains uncertain. Even after the Department of Labor issues its updated guidance, large retirement plan providers like Vanguard and Fidelity would need time to create appropriate funds. Employers would then have to adjust their plans, meaning it could be years before private equity or crypto becomes common in retirement accounts.
While the proposal could change the face of retirement investing, whether workers and employers will embrace the added complexity remains to be seen. Crypto industry players, such as Cantor Equity Partners Inc. (NASDAQ: CEP), will be watching what effect this executive order has on the market for cryptos.
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