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The man who steered Goldman Sachs through the last financial crisis thinks the next one may already be taking shape — and this time, your 401(k) could be caught in the crossfire.
Lloyd Blankfein, who ran Goldman Sachs from 2006 to 2018, recently sounded the alarm on the $1.8 trillion U.S. private credit market on a Bloomberg News podcast (1). These are direct loans outside public markets made by non-bank lenders — like asset managers, private equity firms and debt funds — to companies that can’t or won’t borrow from traditional banks.
The sector exploded after 2008, when tighter bank regulations created a lending vacuum. Fast-forward nearly 18 years later and it’s become one of Wall Street’s favorite products. Blankfein, however, says the signs of excess are hard to ignore.
“It sort of smells like that kind of a moment again,” he said in a separate interview with Citadel, referring to the run-up to the 2008 crisis. “I don’t feel the storm, but the horses are starting to whinny in the corral.”
Blankfein sharpened the warning in his interview with Bloomberg, stating we’re “due for a kind of a reckoning.”
“Everyone says, ‘Oh, the world’s not leveraged,’” he told Citadel. “That’s exactly what everybody said in the mortgage crisis, until you suddenly discover that there was a lot of mortgage risk in Iceland.”
Private credit has long been the domain of sophisticated institutional investors — think pension funds, endowments and sovereign wealth funds. They understood the risks: These loans are hard to value, rarely marked to market and often nearly impossible to sell in a downturn.
Losses don’t materialize overnight the way they did with Lehman Brothers, an American financial services firm that fell victim to the 2008 financial crisis and filed for bankruptcy that year (2). Instead, losses gradually surface and erode returns, hitting pension funds, insurers and retirement accounts slowly, over months or years.
The problem now is who’s holding the bag. In fact, Blankfein specifically called out Wall Street firms for pushing private credit toward everyday investors at exactly the wrong moment.
Last August, President Trump signed an executive order that opened 401(k) plans to alternative assets, including private credit and private equity (3). BlackRock, the world’s largest asset manager, announced plans to launch a 401(k) target-date fund in the first half of this year with a 5% to 20% private investments allocation (4).
But the underlying data is unsettling. As PYMNTS reports, the International Monetary Fund found that by the end of 2024, more than 40% of private credit borrowers had negative free operating cash flow (5). These companies, which are surviving on lender forbearance and accounting flexibility, can’t seem to cover their costs from their own operations.
One of the structural flaws with private market deals is that private credit funds make multiyear loan commitments while offering quarterly redemptions. When conditions turn and investors all want out at once, there’s no orderly exit. And if things go south, it’s retirees and policyholders who absorb the losses — not hedge fund managers.
Blankfein’s warning is that the system is complacent, and when something does eventually give, the losses will find whoever’s last in line. With 401(k)s now in the mix, that could mean you.
The slow-motion nature of a private credit unraveling is what makes it particularly dangerous for retirement savers. Unlike a stock market crash that shows up in your balance immediately, losses in private credit funds can be masked by infrequent valuations for months before they appear on a statement.
To protect your finances, check your 401(k) holdings for any allocation to private credit, alternative lending or business development company (BDC) funds — the vehicles that channel retail money into these loans.
Many target-date funds are beginning to include these exposures without making them obvious. If you’re within 10 years of retirement, the illiquidity risk is especially worth reviewing with a financial advisor, since you may not have the runway to wait out a multiyear collapse.
According to researchers, those who started using a financial planner during the 2008 crisis actually preserved and increased the value of their assets — while those who stopped getting expert counsel experienced a negative impact on their wealth (6).
For those sitting on bigger nest eggs after decades of investing in 401(k)s, speaking with a financial advisor can be particularly beneficial.
Finding the right advisor is simple with Advisor.com. Their platform connects you with licensed financial professionals in your area who can provide personalized guidance.
A professional advisor can also help you determine how many years you have left to invest before retirement and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio.
Through Advisor.com, you can schedule a free, no-obligation consultation to discuss your retirement goals and long-term financial plan.
For those who are still a couple decades away from retirement, allocating a portion of your portfolio to tangible assets like gold, silver and real estate can reduce concentration risk.
That’s because these assets often move independently of stocks and bonds. When traditional finance markets experience volatility, tangible assets — which have intrinsic, physical value — can provide stability, income and a hedge against inflation.
Physical metals, for example, are not dependent on earnings, debt issuance or financial leverage. Not only that, but gold and silver have historically maintained purchasing power during periods of elevated inflation and currency weakness.
Consider gold’s performance during the Great Recession. According to the Bureau of Labor Statistics, the producer price index for the yellow metal rose 2.6% in 2008 and 12.8% in 2009 (7). In contrast, the benchmark S&P 500 index fell 57% from its October 2007 peak to its March 2009 low (8).
If you want to take advantage of this stabilizing asset — and also benefit from significant tax advantages — consider opening a gold IRA with the help of Priority Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold. That makes it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.
To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.
Real estate is another tangible asset with a long history of adding stability to investors’ portfolios. According to the National Council of Real Estate Investment Fiduciaries, both residential and commercial real estate outperformed the S&P 500 over the 25-year period from 1996 to 2021 (9).
Today, you can tap into the residential real estate market through platforms like Arrived.
Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.
To get started, simply browse through their selection of vetted properties, each picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning monthly dividends.
Beyond single-family assets, multifamily and industrial rentals offer another excellent investment opportunity, as both have a strong outlook for 2026 (10).
Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT, which gives accredited investors access to single-asset multifamily and industrial deals.
Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000.
— With files from Emma Caplan-Fisher
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Bloomberg (1); Economics Observatory (2); WhiteHouse.gov (3); CNBC (4); PYMNTS (5); IDEAS (6); Bureau of Labor Statistics (7); Federal Reserve History (8); Investopedia (9); J.P. Morgan (10)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.