Trump Is Allowing Alternative Assets in 401(k) Plans—What to Know

President Donald Trump signed an executive order last week allowing alternative assets, such as cryptocurrencies and private equity, in 401(k) retirement plans.

Industry experts said the White House decision could alter the composition of Americans’ retirement portfolios, broadening the types of assets that investors can hold and the options that financial institutions can offer to their clients in the $9 trillion retirement market.

Trump stated in the order that the aim is to democratize “access to alternative assets,” thereby enabling the public to diversify their retirement accounts.

“My Administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement,” the president said in the order.

Here is what to know.

The Executive Order

The executive order, signed on Aug. 7, directs the secretary of the Labor Department to reassess past and present fiduciary standards governing private market investments—including private equity and other alternative assets—held in 401(k) and similar defined contribution plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).

ERISA is a federal law that sets minimum protections for retirement plan participants.

List of Alternative Assets

According to the White House, alternative assets are defined as private market investments, digital assets controlled in actively managed investment vehicles, and direct or indirect real estate assets.

The order also lists commodities, infrastructure projects, and lifetime income investment strategies as being potential options for retirement accounts.

Although it is not prohibited by the government, as investors could technically dedicate their retirement portfolio to private market investments, plan sponsors have refrained from offering a suite of alternative asset options because of potential legal complications, administrative burdens, and challenges in managing these assets.

Account holders will enjoy new investment opportunities for retirement savings, but they may also be more susceptible to volatility and incur potentially higher fees.

Rulemaking Process

The labor secretary will conduct a formal review, alongside the treasury secretary, the Securities and Exchange Commission (SEC), and other federal regulators. The objective of the coordinated effort is to identify potential reforms that will bolster oversight and ensure that changes align with long-term retirement security goals.

The president granted U.S. officials 180 days to conduct the rulemaking process, meaning that the reforms might not take effect until 2026.

This comes shortly after the SEC announced that it would prioritize private market investments in retirement accounts for fiscal year 2026. The top Wall Street regulator, in a June report to Congress, noted that retirement savers would potentially be exposed to both benefits and risks.

Reaction

This past spring, BlackRock CEO Larry Fink wrote in his annual letter to investors that retirement plans should allocate more funds to private assets.

In the March letter, Fink stated that the retirement system should provide a safety net and a ladder, “a way to grow savings, compounding wealth year after year.”

“Right now, the country focuses heavily on preventing people from hitting the floor, as we should,” Fink wrote. “But the U.S. needs to put just as much effort into helping people climb to the ceiling—through investing.”

Many of his industry colleagues appear to agree.

A recent survey by financial services firm Empower found growing support for private market investments in retirement plans among advisers. The poll revealed that 58 percent of advisers who currently use private market investments would recommend them to clients for retirement plans.

Advisers cited diversification, higher return potential, and lower correlation with public markets as the top benefits of investing in alternative assets. They also listed liquidity, fees, and investment complexity as potential drawbacks for further adoption.

According to Edmund F. Murphy III, president and CEO of Empower, private markets are not a niche corner of global financial markets.

“With most U.S. companies privately held and trillions of dollars from individuals already invested, expanding access to these markets through defined contribution plans presents a significant opportunity to enhance long-term retirement outcomes,” he said. “Aligning the 401(k) system to private markets investing normalizes the U.S. retirement system with the rest of the international and defined benefit investing universe.”

The Securities Industry and Financial Markets Association, a trade association for asset managers, broker-dealers, and investment banks, lauded the president’s executive action.

“Policy changes to expand access to private markets investments—appropriately tailored under ERISA and SEC rules—could serve to improve diversification, democratize access, and offer more investment choices to the benefit of everyday retirement savers,” Kenneth E. Bentsen Jr., the group’s president and CEO, said in an Aug. 7 statement.

Debates Ahead

Market watchers have started debating the question of whether retirees will benefit from new options.

Hal Ratner, head of research at Morningstar Investment Management, wrote in an Aug. 7 report that the private market has grown more rapidly than the public market in recent years. According to Ratner, there are 25 times more individual companies in the private equity market than in publicly traded markets.

“Firms are staying private for longer and coming to the [initial public offering] market larger and more mature,” Ratner said. “Therefore, the growth opportunities available to public market investors have become more limited.”

Others, such as Sen. Elizabeth Warren (D-Mass.), are concerned about the risks of having private equity involved in 401(k)s.

In a July 11 letter to Empower, Warren sought clarification on the firm’s decision to offer private equity as an investment option to its clients and how the organization would protect plan participants “from the structural risks inherent in private markets.”

Ultimately, it comes down to choice, Labor Secretary Lori Chavez-DeRemer said.

“The Department of Labor already took action to rescind the Biden Administration’s guidance that disadvantaged crypto investments,” Chavez-DeRemer said in a statement following Trump’s directive. “This Executive Order further supports our efforts to improve flexibility and eliminate unfair one-size-fits-all approaches, and I applaud President Trump for taking decisive action.”