President Donald Trump’s executive order last week to pave the way for millions of Americans to invest their retirement savings in high-risk cryptocurrency assets and private equity isn’t just a big win for the asset industry but would radically remake 401(k) options.
But it also brings higher risks and could endanger billions of dollars in retirement savings, financial planners contend.
The executive order directs the Department of Labor and other agencies to expand access to digital assets, private market investments, and real estate interests within 180 days. It specifically asks the Securities and Exchange Commission to consider ways to facilitate access to alternative assets for plans like 401(k)s. Americans have an estimated $12.2 trillion tied up in 401(k) and related retirement plans.
Employers would have to decide to offer the plans — and experts anticipate that many might be reluctant, out of concern they would be held liable for losses.
Even should regulators rewrite regulations to allow expanded investment choices, it would take an extended period for the major retirement plan companies like Fidelity Investments and the Vanguard Group Inc. to develop appropriate funds for employers to use. And employers are unlikely to revise their retirement plan options quickly—it might take years, experts say.
The order would radically alter the retirement options of most Americans who increasingly rely on 401(k) plans as their primary source of post-work income. Most employers offer a menu of investment choices among major asset classes that include stock-based mutual funds.
For decades, the $5 trillion private equity industry, which makes investments into private businesses rather than publicly traded stocks, has yearned to compete for a role in retirement plans – as has the cryptocurrency industry, whose executives strongly supported Trump’s 2024 campaign.
Americans’ retirement plans are currently overseen by the Employee Retirement Income Security Act of 1974, under which employers are required by law to offer retirement options that are in the best interest of their employees, and not Wall Street.
Indeed, during the administration of former President Joe Biden, federal regulators were to treat cryptocurrency investments with “extreme care” because of the extreme volatility of crypto prices.
Jon Gray, Blackstone’s president and chief operating officer, recently told analysts that private assets are more appropriate for younger investors that have a longer investing horizon.
