Private Equity and Cryptocurrency May Soon Be Part of Your 401(k): What You Need to Know
A recent executive order signed by former President Donald Trump is paving the way for a significant shift in employer-sponsored retirement accounts, including 401(k) plans. Traditionally dominated by stock and bond funds, these retirement accounts could soon offer a broader array of investment options, such as private equity, real estate, and cryptocurrency funds.
What Is Changing?
Currently, most 401(k) plans allow workers to invest in publicly traded stocks and bonds through their employer. This new executive order directs federal agencies — the Department of Labor, the Treasury, and the Securities and Exchange Commission — to develop regulations enabling "alternative assets" to be included alongside conventional options in these retirement plans.
This change could democratize access to investments that have historically been available only to institutional investors and ultra-wealthy individuals.
Understanding Private Equity in Your 401(k)
Private equity involves investment firms purchasing companies or assets, often those in distress, with the goal of turning them around for a profit. While successful turnarounds can be lucrative, failures are not uncommon — as was the case with Toys R Us, which struggled under heavy debt loads post-private equity buyout.
Historically, only large institutions like university endowments and pension funds or wealthy individuals have had access to private equity investments. Bringing these options into 401(k)s could give average workers the chance to invest in them, representing a significant shift in accessibility.
However, Lisa Kirchenbauer, founding partner and senior advisor at Omega Wealth Management, cautions that simply gaining access to private equity doesn’t guarantee investors will benefit from the kinds of opportunities that have created wealth for high-end investors. The actual investments available in these new funds may not represent the best deals, which could be kept within exclusive networks.
Potential Risks and Considerations
Including private equity and cryptocurrency in retirement accounts is not without controversy. Private equity funds are known for:
- High fees: Typically a 2% management fee plus 20% of profits.
- Long lock-in periods: Investments may be illiquid for a decade or more.
- Complexity and transparency issues: Making it harder for average investors to fully understand risk.
Cryptocurrency, on the other hand, carries its own challenges:
- High volatility: Crypto markets can swing dramatically.
- Lack of regulation: Creating uncertainties around investor protections.
Despite these concerns, the Trump administration rescinded previous guidance issued during the Biden era that discouraged retirement plans from including cryptocurrencies. This reversal signals a more welcoming stance toward alternative assets.
What This Means for Workers and Employers
Federal law requires employer plan administrators to act as fiduciaries, making decisions that serve employees’ best interests. Employers offering 401(k) plans will have the choice to include these new assets, but they will also bear responsibility for ensuring they don’t expose workers to unreasonable risks.
Plan administrators have historically preferred the "vanilla" staples of stock and bond funds due to their relative safety and transparency. Whether they will embrace these new, riskier investment options remains to be seen.
Expert Recommendations
Financial experts weigh in cautiously. Jeff Hooke, senior finance lecturer at Johns Hopkins University, points out that the high fees and mediocre performance of private equity over the past decade do not make it a compelling choice for most retirement investors. He recommends sticking with low-cost stock and bond index funds that track market performance.
For those interested in exploring alternative assets and who are decades away from retirement, Kirchenbauer suggests a conservative allocation of about 5–10% of the portfolio to such investments.
Looking Ahead
While these changes open new doors, the inclusion of private equity and cryptocurrency in your 401(k) is not imminent. Financial product developers must first create suitable funds tailored for retail investors, which is already underway. Meanwhile, individual investors should stay informed about new options and carefully consider the risks if and when they become available.
For most people, a diversified mix of traditional investments—stocks and bonds—remains a prudent approach to saving for retirement.
This article is based on NPR’s coverage as of August 16, 2025.