It’s official: former President Donald Trump has greenlit a major shift for your retirement savings. He signed an executive order allowing 401(k) plans to put money into “alternative assets.” This means things like private companies, real estate, and yes, even cryptocurrencies. The move aims to open up a slice of the massive $12.5 trillion held in 401(k) accounts. This decision also gives a big boost to Trump’s support for the crypto world. Still, some worry about the higher risks and fees these new options could bring.
The White House confirmed Trump signed the order on a Thursday. The document tells the Department of Labor to review its rules. This review covers alternative investments in plans under the Employee Retirement Income Security Act (ERISA), as reported by Bloomberg. An official, who preferred to remain unnamed, said the order also wants clear guidance. This guidance is about how plan managers handle their financial duties when offering funds with these less common assets.
Furthermore, Secretary of Labor Lori Chavez-DeRemer is now tasked with coordinating efforts. She’ll work with the Treasury Department, the Securities and Exchange Commission (SEC), and other regulators. Their goal is to find ways to make it easier for these investments to happen. The SEC, in particular, received direct instructions to help participant-directed retirement plans add alternative assets, with a special nod to cryptocurrencies.
A Game-Changing Move for Retirement Savings
This order marks the biggest step by the Trump administration to bring private assets into defined contribution plans. For many months, top officials debated loosening the legal chains. These rules have kept many of these financial products out of most workers’ investment portfolios. Most retirement savings today sit in stocks and bonds. This is partly because companies managing these plans don’t want to deal with investments that are hard to sell or complex.
This isn’t entirely new territory for Trump. During his first term, the Department of Labor also allowed private equity in retirement plans. However, that decision was later reversed when Joe Biden was president. Now, the door is swinging open again.
Industry Eyes Big Opportunity, But Risks Loom
Both traditional and alternative asset managers see 401(k) accounts as their next big growth area. Many large investors, like pension funds and university endowments, have already hit their internal limits for investing in private equity. This comes as the market for company buyouts slows down, leading to fewer payouts to clients.
Those who support these new options argue it will give savers more choices. They also believe it could lead to better returns. But they also caution that these investments come with higher risks and steeper fees. This could potentially expose plan administrators to lawsuits if things go wrong. Market data shows a clear trend: the number of publicly traded companies in the U.S. has dropped sharply since the 1990s. Meanwhile, private equity assets have doubled in the ten years leading up to 2023.
Crypto’s Place in the Political Playbook
This executive order fits neatly into Trump’s larger plan to boost the cryptocurrency industry. Just last month, the White House held a “Crypto Week.” They also passed the first federal law to regulate stablecoins, known as the GENIUS Act.
Trump recently appointed venture capitalist David Sacks. He became the first “czar” for artificial intelligence and cryptocurrencies in White House history. Trump also signed orders to create a Strategic Bitcoin Reserve and another for digital assets. The administration has even promised to name regulators who are friendly to the crypto sector. They also vowed to suspend or drop lawsuits against major platforms like Coinbase, Robinhood, Uniswap Labs, and OpenSea.
On a personal note, Trump and his family have launched several crypto-related projects. These ventures have added at least $620 million to his net worth in recent months, according to the Bloomberg index.