Former President Donald Trump is preparing a sweeping reform that could reshape how Americans invest for retirement. According to reports from The Wall Street Journal and Bloomberg, Trump and his administration are working on an executive order that would allow 401(k) retirement plans to include private investments like private equity, real estate, hedge funds — and possibly even gold and cryptocurrency.
This marks a major shift from the current rules, where 401(k)s are limited mostly to traditional investments like publicly traded stocks, bonds, and mutual funds. The move could potentially open the door for higher returns but may also bring greater risks and complexity to the average retirement investor.
Why This Matters: $12 Trillion on the Line
The U.S. 401(k) market is valued at an estimated $12 trillion, and opening it to a broader set of investments could be a game changer for how retirement savings are managed.
Supporters of the plan — particularly in the private equity and asset management industries — see this as a victory. They’ve long pushed for access to this large pool of capital, which was previously off-limits due to regulatory hurdles and fiduciary concerns.
Advocates argue that adding private assets to retirement accounts will give investors more opportunities for growth and diversification. But critics warn that these investments are often illiquid, costly, and complex — and may not suit the average worker saving for retirement.
What Are 401(k)s and How Would This Change Work?
401(k) plans are employer-sponsored retirement accounts where employees make pre-tax contributions. Employers often match part of those contributions. Currently, these funds are invested in public market assets like:
- Stocks
- Bonds
- Mutual Funds
The new proposal would allow these retirement funds to also be invested in private-market assets, including:
- Private Equity
- Venture Capital
- Hedge Funds
- Real Estate
- Possibly Gold and Cryptocurrency
These asset classes are not traded on public exchanges and typically come with higher fees, lower liquidity, and more complex structures.
In fact, back in 2020, Trump’s first administration released an information letter indicating that private equity could be included in 401(k)s without violating fiduciary laws — provided proper guidance and safeguards were in place.
What Are Experts and Organizations Saying?
Opinions are mixed across the board:
- Bryan Corbett, President & CEO of the Managed Funds Association:
“Expanding access to alternative investments in 401(k)s gives Americans more tools to build wealth and plan for retirement.”
- Edmund F. Murphy III, CEO of Empower:
“Private investing isn’t for everyone, but people should have the right to explore those options.”
- Gopi Shah Goda, Brookings Institution:
“While private equity could offer diversification and higher returns, these investments are complex and come with higher fees and limited transparency — a risky match for average savers, especially those nearing retirement.”
Polls reflect growing interest: A recent survey by Empower showed that 74% of 401(k) participants support private investment access, and 72% believe it could improve long-term savings outcomes.
What Could Go Wrong?
Critics raise several red flags:
- High fees could eat into retirement savings.
- Illiquidity makes it harder to withdraw or reallocate funds quickly.
- Transparency issues may leave investors unaware of risks.
- Complexity could make it harder for average Americans to manage their portfolios effectively.
- Legal liability under ERISA could increase for employers offering such plans.
Jeffrey Hooke, a finance professor at Johns Hopkins, was blunt:
“Private equity rarely outperforms the stock market, and its high fees and complexity make it a poor choice for most retirement savers.”
What Happens Next?
As of now, the executive order has not been finalized and is still under review. A White House spokesperson noted that no changes are official until President Trump personally confirms them, but emphasized the administration’s commitment to strengthening the financial future of everyday Americans.
If finalized, this shift could redefine 401(k) investing for years to come — opening the door for new opportunities but also new risks. Financial advisors and retirement savers alike should stay tuned.
