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resident Donald J. Trump signed an Executive Order on August 7, 2025, allowing 401(k) plans to invest in alternative assets such as private equity, real estate, and cryptocurrencies for the first time. This policy change has the potential to alter retirement savings for approximately 70 million Americans participating in 401(k) plans.
The Executive Order directs the Department of Labor to review its rules on fiduciaries handling alternative investments in ERISA-covered retirement accounts. The SEC will modify regulations to permit 401(k) participants to select funds with alternative assets, breaking down barriers that historically prohibited workers from accessing these investments.
This change aims to enhance retirement security by diversifying investments and creating a more level playing field for all investors. Until now, most 401(k) plans have only offered a limited menu of asset classes, such as mutual funds, index funds, bonds, and company stock.
The inclusion of cryptocurrencies in 401(k) plans has generated excitement due to their potential for high returns and diversification benefits that don't always correlate with traditional markets. However, digital assets are volatile and come with regulatory challenges, custodial concerns, and security risks.
Proponents argue that adding investment choices can create better outcomes for workers by providing access to alternative assets typically reserved for institutional investors or the affluent. Critics raise concerns about the risks associated with private equity and cryptocurrency investments, including expensive structures, excessive fees, long lock-up periods, and cybersecurity threats.
The regulatory process will determine the specifics of how this policy change unfolds. The Department of Labor must produce updated guidance on fiduciary duties when providing alternative asset classes to retirement savers, while the SEC and Treasury formulate regulations to allow for alternative assets as qualified default investment alternatives.
Ultimately, the value of this policy will depend on how regulators provide clarity through regulation, how sponsors incorporate alternative asset offerings into retirement products, and how quickly individual savers comprehend the assets in which they choose to invest.
