Trump Orders Private Equity, Crypto in 401(k) Plans/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ President Donald Trump signed an executive order that could allow Americans to invest 401(k) retirement funds in private equity, cryptocurrency, and other alternative assets. Federal regulators must still rewrite rules before the options become available. Supporters see diversification benefits, while critics warn of higher risks and volatility.
Trump 401(k) Expansion: Quick Looks
- Trump signs executive order opening 401(k)s to private equity, crypto, real estate
- Federal agencies must redefine “qualified asset” under ERISA rules
- Current retirement options mostly limited to stocks, bonds, cash, and commodities
- $5 trillion private equity industry gains long-sought access to retirement funds
- Crypto industry, major Trump donors, welcome inclusion in retirement investing
- Bitcoin price rises 2% to $116,542 after announcement
- Private equity historically outperforms stocks but is illiquid and higher risk
- Major providers like Fidelity and Vanguard may take years to adapt
- Critics point to volatility and lack of liquidity in new asset classes
- Regulations and investor education needed before rollout
Deep Look
Trump Executive Order Could Transform 401(k) Retirement Landscape with Private Equity and Crypto Access
NEW YORK — Millions of Americans could soon see a dramatic expansion of their retirement investment options after President Donald Trump signed an executive order Thursday aimed at opening 401(k) plans to private equity, cryptocurrency, and other alternative assets.
While no immediate changes take effect, the order directs the Labor Department and other federal agencies to rewrite the rules governing what qualifies as an acceptable 401(k) asset under the Employee Retirement Income Security Act of 1974 (ERISA). The changes could take months or longer to finalize, after which employers could begin offering broader investment menus to their workers.
Expanding Beyond Stocks and Bonds
Currently, most American 401(k) accounts are built around mutual funds holding stocks, bonds, cash, and a small share of commodities such as gold. Under Trump’s order, employers could eventually add mutual funds or investment products linked to private equity, digital currencies like bitcoin, and real estate.
ERISA requires that retirement plans act in the best interest of employees, ensuring investments are suitable and not purely for Wall Street profit. Trump’s directive, however, rewards two powerful industries that have been lobbying for access to these funds for decades:
- Private equity, a $5 trillion industry known for buying and restructuring companies, historically generating higher returns than public markets.
- Cryptocurrency, a volatile but fast-growing sector whose leaders strongly backed Trump’s 2024 campaign and inauguration.
Market Reactions and Industry Support
The announcement sent bitcoin prices up 2% on Thursday to $116,542, nearly double its value since Trump’s election victory. Cryptocurrency executives see the move as a major step toward mainstream acceptance. Cory Klippsten, CEO of Swan Bitcoin, called the inclusion of bitcoin in retirement plans “inevitable” and predicted strong uptake from younger, tech-savvy workers seeking “hard money, not melting ice cubes.”
Private equity leaders echoed the optimism. Bryan Corbett, president of the Managed Funds Association, said his group looks forward to working with the administration on a framework that expands access “with appropriate investor guardrails.”
Blackstone CEO Steve Schwarzman has called tapping retirement accounts a “dream” for the industry since at least 2017.
Risk and Return Tradeoffs
Private equity investments have historically averaged annual returns of about 13% since 1990, compared with the S&P 500’s 10.6% return, including dividends, over the same period. But they carry significant risks:
- Illiquidity: Investments are typically locked up for years until the underlying companies are sold.
- Higher fees: Management and performance fees can eat into returns.
- Market exposure: Underlying companies may face operational or financial struggles.
Cryptocurrencies face their own challenges. Prices can swing 10% or more in a single day — far greater than typical stock market volatility. This was a key reason the Biden administration advised “extreme care” with crypto in retirement plans.
Political and Regulatory Context
For the crypto industry, qualifying under ERISA was a major lobbying goal. Coinbase, one of the largest U.S. crypto exchanges, was a major donor to Trump’s summer military parade and saw the SEC drop a lawsuit against it after the administration shift.
Trump’s order marks a reversal from prior administrations — both Republican and Democrat — which generally opposed including private equity in 401(k) plans due to complexity and risk.
Federal agencies will now begin crafting detailed regulations. Retirement plan giants like Fidelity, Vanguard, and T. Rowe Price will then decide whether to create new products that comply with the updated rules. Vanguard, for example, has not committed to launching private equity products but says it is “dedicated to educating retirement investors” on risks and opportunities.
Implementation Timeline
Even after rule changes, widespread adoption will take time. Employers typically review their retirement plan menus annually, and many will be cautious about adding complex, higher-risk products. Analysts say it could be several years before a significant number of 401(k) investors have access to crypto or private equity funds.
In the meantime, the order has opened the door for an unprecedented shift in how Americans save for retirement — one that blends traditional long-term investing with alternative assets once reserved for institutions and wealthy individuals.
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