Private Equity and Cryptocurrency Could Soon Be Part of Your 401(k): What You Need to Know
By Laurel Wamsley, NPR — August 16, 2025
In a significant shift for retirement investing, a recent executive order signed by former President Donald Trump is paving the way for a wider variety of assets, including private equity and cryptocurrencies, to be included in employer-sponsored retirement plans such as 401(k)s. This marks a departure from the usual lineup of traditional stock and bond funds that have long dominated these accounts.
What Is Changing?
Currently, most 401(k) and similar retirement accounts offer investment options largely limited to publicly traded stocks and bonds. However, the executive order directs federal agencies—the Department of Labor, the Treasury, and the Securities and Exchange Commission—to create regulatory frameworks that would allow “alternative assets” to be added to retirement fund menus. Alternative assets include private equity, real estate, and cryptocurrencies.
The goal of the order is to broaden investment opportunities within retirement plans, giving workers access to types of investments that, until now, were typically restricted to institutional investors or very wealthy individuals.
Understanding Private Equity in Your 401(k)
Private equity firms invest by purchasing companies—often those in financial distress—with the hope of turning them around and eventually selling for a profit. While this strategy can yield substantial returns, it also carries significant risks. For example, Toys R Us was famously burdened with debt under private equity ownership and ultimately went bankrupt.
Historically, participation in private equity investments has been limited to entities like university endowments and state pension funds, or very affluent individuals. Making private equity accessible to regular 401(k) investors would represent a democratization of these exclusive investment types.
Yet Lisa Kirchenbauer, founding partner and senior advisor at Omega Wealth Management, urges caution: “There’s a bit of democratization here, but that doesn’t mean you’re getting the kind of opportunities that have made other people wealthy. The critical factor will be which companies or investments end up in these new funds.”
Employers hold a key role in this transition, as they manage 401(k) plans and decide which funds to offer. Under the Employee Retirement Income Security Act (ERISA), employers have fiduciary responsibility to act in employees’ best interests and can face legal consequences for neglecting this duty.
Regulatory Background and Shifting Government Stances
Previously, many plan administrators opted against including alternative assets due to concerns over higher risks, complexity, limited transparency, and, particularly with private equity, notably higher fees. The Biden administration explicitly cautioned against adding cryptocurrency funds to 401(k)s, citing regulatory and market risks.
However, the Trump administration reversed this guidance in May, signaling a more welcoming stance toward alternative asset inclusion in retirement plans.
New Opportunities, New Risks
If realized, this policy shift could expand retirement account offerings beyond stocks and bonds — but such changes are not imminent. Investment firms are currently developing new retail-friendly products that could bring private equity and cryptocurrency investments to the 401(k) space, enticing a vast new group of investors.
Experts sound a note of caution for employees considering these options:
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Private equity fees are steep, typically charging a 2% management fee plus 20% of profits. Investors also face long lock-up periods, often 10 years or more, limiting flexibility for those nearing retirement or changing jobs.
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Jeff Hooke, senior finance lecturer at Johns Hopkins University, highlights the challenges: “The fees for private equity are simply too high to make them a good choice for typical retirement funds. And over the last decade, the returns have been mediocre at best.”
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Cryptocurrency investments carry their own risks, characterized by extreme price volatility and limited regulatory oversight.
Financial advisors like Kirchenbauer suggest that investors who are enthusiastic about alternative investments and have a long time horizon before retirement might allocate a modest portion—around 5 to 10%—of their portfolio to these assets.
Conversely, experts such as Hooke recommend a conservative approach: focusing on low-cost stock and bond index funds that mirror market performance without the burden of high fees.
What This Means for You
If you participate in a 401(k) plan, the introduction of private equity and cryptocurrency options could provide new ways to diversify your retirement portfolio. However, these options may not be suitable for everyone, particularly those with lower risk tolerance or shorter timelines until retirement.
Before making any investment decisions related to these alternative assets, it’s essential to understand the risks, fees, and potential lack of liquidity involved. For most retirement savers, sticking with traditional, diversified stock and bond funds remains a prudent strategy.
As these developments progress, workers should watch for updates from their employers and plan administrators about available investment choices—while carefully weighing how alternative asset options fit with their individual financial goals and risk comfort.
For more information on retirement investing and updates on evolving 401(k) options, visit NPR’s Your Money section.