US President Donald Trump has signed an executive order that could significantly change how Americans invest their retirement savings. The order, announced earlier this week, clears the path for 401(k) plans to include private equity, cryptocurrency, real estate and other alternative assets, NBC News reported. Here is what has happened, why it matter and what it means for you.
More Choices, More Risk
The move is seen as a win for the asset management industry, which now has a shot at tapping into the $12.2 trillion in American retirement accounts. However, experts have warned that these new options could bring major risks for everyday investors.
“The theoretical benefits are that everyday Americans can invest in a broader menu of companies,“ Robert Brokamp of The Motley Fool told NBC News, adding that “there is a lot less transparency and liquidity in private markets.“
Higher fees and lower accessibility are also concerns. Benjamin Schiffrin from Better Markets noted that while mutual funds typically charge around 0.3%, private funds can charge between one and two percent in management fees, plus up to 20% in performance fees.
What’s Changing?
Private equity and crypto are already technically allowed in 401(k)s, but few plans offer them. The executive order instructs the Department of Labor to re-examine its rules within 180 days and urges the SEC to help ease access to these alternative assets.
“I think this is going to open the floodgates,“ Schiffrin reportedly said. But he and others are wary. “It could be detrimental to less-informed investors whose only investment account is their 401(k),“ a financial planner at SageMint Wealth told NBC.
Employers Still Hold the Keys
Employers will ultimately decide whether to add these options. Many may hesitate, given the liability risks. But clearer federal guidance could encourage broader adoption, which has some experts worried.
Knut Rostad, of the Institute for the Fiduciary Standard, predicted dire outcomes, reportedly saying, “The result will be a massive train wreck where many people are seriously hurt. Their retirement accounts will be annihilated.“
Cryptocurrency poses even more uncertainty. Schiffrin expressed skepticism over what protections, if any, investors are going to have when it comes to investing in crypto. .
Industry Cheers, Experts Caution
Kenneth Bentsen Jr., CEO of SIFMA, praised the move: “Policy changes to expand access… could serve to improve diversification, democratize access, and offer more investment choices.“
But experts agree: guardrails, education, and transparency are essential, since “otherwise, “we could be setting the stage for not only financial loss, but broader economic and social consequences.“
