Nearly a year after President Donald Trump signed an executive order encouraging broader investment options in 401(k) plans, the Department of Labor has since taken the next step: in March 2026, it proposed a rule to make it easier for plans to offer these assets, and the public comment period on that proposal closed in June. The rule still isn’t final. If finalized, it could eventually give some workers access to alternative investments like private equity and cryptocurrency, but most retirement plans aren’t changing overnight.

In that executive order, he highlighted that workers should be able to invest in private equity and cryptocurrency within their 401(k)s if they choose. A few months earlier, in May 2025, the Department of Labor had already rescinded a Biden-era statement that urged fiduciaries to use extreme care before adding cryptocurrency to 401(k) investment menus.

After the executive order, large private asset firms like Blackstone and Apollo Global Management began creating products specifically for 401(k) plans. However, many financial experts and government officials have concerns about offering alternative assets in 401(k) plans, namely that the investments can be risky and illiquid. Here’s everything you need to know about it.

Private equity investments are usually reserved for accredited
investors


Private equity essentially means private businesses. Large asset funds and hedge
funds invest in companies that are not publicly traded. Private equity firms
acquire companies, sell private businesses, and typically, these investment
deals are not available to the general public.


Usually, only accredited investors and qualified clients can invest in these
deals. However, allowing this type of investment within 401(k) plans will expand
access to millions of investors. The main drawback, though, is that these funds
are risky.

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How private equity differs from traditional 401(k) investments


Most 401(k) plans allow investors to purchase assets such as stocks, bonds,
mutual funds, ETFs, and other traditional investments. While these investments
carry inherent risk and the stock market fluctuates regularly, investors can
choose assets based on their risk tolerance.


Alternative investments, such as cryptocurrency and private equity, have a
history of greater volatility.

What proponents of alternative assets in 401(k)s say


The proponents of alternative investments disagree with the argument about
volatility. One cryptocurrency CEO explained that stocks can be incredibly
volatile as well, and those are allowed within 401(k) plans.


President Trump’s executive order specifically stated that the purpose of
allowing alternative investments in 401(k) plans is to democratize access to
them. The idea is that for decades, private equity has been reserved for a
select few. Allowing these assets in 401(k)s gives American workers the
opportunity to take part in these investments, too.

What the critics say about allowing alternative assets in 401(k) plans


Critics of allowing alternative assets in 401(k) plans are concerned that
workers will purchase these assets without realizing the risk. In fact, Senator
Elizabeth Warren drafted a letter to the SEC asking how it would protect
American workers if these types of assets were allowed in 401(k) plans.


The concern is that workers will invest in cryptocurrency or private equity,
thinking that they will earn guaranteed returns, when they might experience
volatility and lose hard-earned retirement investment gains.

The importance of investment transparency and liquidity


Another concern that some financial experts highlight is that private equity is
an illiquid form of investing. Many private equity deals take a long-term
approach to getting returns. Additionally, private equity has high fees, which
can dramatically cut into an individual’s retirement returns.

Courts are defining retirement plan protections in real time


While government officials are considering allowing alternative investments in
401(k) plans, there are active court cases discussing “loss causation,” that is,
who is responsible for investment choices: the workers or the employers who
manage retirement plans. In fact, the Supreme Court agreed in January 2026 to hear Anderson v. Intel, a case centered on whether employers can be held liable for including alternative investments like private equity in their retirement plan lineups.


401(k) plans are supposed to have protections under a law called ERISA, the
Employee Retirement Income Security Act. This law requires employers to be
fiduciaries for employees. However, these recent court cases show it may be hard
for workers to get legal protection when investments go wrong. The Department of Labor’s proposed rule tries to ease this uncertainty by offering employers a “safe harbor” (a set of steps they can follow when selecting these investments to reduce their litigation risk).

How workers can stay up to date on their 401(k) investment options


To stay up to date on these evolving 401(k) changes, employees should read
emails from their employer or human resources department that outline any
changes in asset availability. If employees are unsure whether these assets are
right for them, it’s a good idea to check with a financial planner to ensure
they have the proper asset allocation to help them reach their retirement goals. Before making changes to your retirement strategy, be sure you’re not making common IRS-related 401(k) mistakes that could cost you money over time.

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Bottom line


Although 401(k)s may include alternative assets soon, most workers likely won’t
choose these investments directly. Rather, these investments will likely be
included as part of larger funds. Workers should be aware of fees, fund
expenses, and overall risk when choosing any asset for a 401(k) plan.

After all,
the goal is to invest enough to have a stress-free retirement.
Choosing highly volatile investments can put that at risk, so it’s important to
carefully vet any asset in a 401(k), regardless of what it is.

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