President Trump Expands 401(k) Investment Choices with New Executive Order

On August 7, 2025, President Donald J. Trump signed an executive order titled "Democratizing Access to Alternative Assets for 401(k) Investors," aiming to broaden the investment options available within 401(k) retirement plans. This directive seeks to include alternative assets such as private equity, real estate, cryptocurrencies, commodities, infrastructure projects, and lifetime income strategies in these plans.

The executive order instructs the Department of Labor (DOL) to reassess its guidance on fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) concerning these alternative investments. Specifically, the DOL is directed to clarify its position on alternative assets and the appropriate fiduciary processes associated with offering asset allocation funds containing such investments. Additionally, the order calls for collaboration with the Treasury Department and the Securities and Exchange Commission (SEC) to facilitate regulatory changes that would enable plan participants to access these investment opportunities.

Traditionally, 401(k) plans have been limited to conventional investments like stocks, bonds, and mutual funds. Alternative assets, often associated with higher returns and diversification benefits, have primarily been accessible to institutional investors and high-net-worth individuals. This executive order seeks to democratize access to these investment opportunities for the approximately 90 million Americans participating in employer-sponsored defined-contribution plans, which collectively hold around $9 trillion in assets.

Supporters of the executive order argue that it will provide American workers with diversified investment options, potentially enhancing their retirement savings. Empower, a major retirement services provider, has expressed support for the administration's efforts to expand investment choice, increase portfolio resilience, and improve long-term growth potential for retirement savers. The company has launched a new suite of professionally managed investment options that include private market strategies, such as private equity, private credit, and private real estate, delivered through Collective Investment Trusts (CITs) and managed account solutions in partnership with leading asset managers and custodians.

Critics, however, highlight the risks associated with alternative assets, including higher fees, illiquidity, and lower transparency compared to traditional investments. They caution that these factors could pose challenges for average investors seeking stable, long-term growth in their retirement accounts. Financial advisors warn that the long-term, high-risk nature of private investments might not be suitable for retirement accounts intended for stable, long-term growth.

This policy shift follows heavy lobbying by private equity and crypto sectors and marks a continuation of Trump's deregulatory agenda. The Department of Labor is now tasked with offering fiduciary protections to 401(k) managers to mitigate litigation risks linked to higher fees, leverage, and illiquid investments. Industry insiders view the guidance as likely to reduce lawsuits, though not eliminate them entirely. This decision is expected to bring potentially hundreds of billions of dollars into private capital markets amid challenges with traditional fundraising sources like pension funds and endowments.

President Trump's executive order represents a pivotal change in retirement investment policy, aiming to provide American workers with broader investment choices. While the potential for enhanced returns exists, it is accompanied by increased risks and complexities, necessitating careful consideration by both fiduciaries and plan participants.