Executive Order Could Bring Alternative Investments to 401(k) Plans: What You Need to Know

Defining Alternative Investments

While the term “alternative investments” can sound complex, here’s what it typically means in this context.

Examples of Alternatives That Could Appear in 401(k) Menus

According to the Executive Order, alternatives could include:

• Private equity – investments in companies that aren’t traded on the stock market
• Real estate – direct ownership or debt tied to property
• Digital assets – cryptocurrencies held in professionally managed funds
• Commodities – such as gold or energy-related investments
• Infrastructure projects – like roads, bridges, and energy facilities
• Lifetime income strategies – products designed to provide steady income in retirement

These investments can offer diversification—meaning they may perform differently than stocks and bonds—and, in some cases, the potential for higher long-term returns.

Why This Matters for Retirement Savers

The move is meant to “level the playing field” between everyday retirement savers and large institutional investors. Public pension and defined benefit plans have long invested in alternatives to help boost returns and reduce risk. But for most 401(k) participants, these investments have been off-limits due to regulatory guidance, stricter rules, concerns over fees, and fear of lawsuits or legal challenges.

The Potential Downsides

While the idea may sound appealing, there are important considerations:

• Higher costs: Alternatives often carry higher fees than traditional mutual funds.
• Higher risk: Some alternatives may carry greater volatility or the potential for significant losses.
• Liquidity limits: They may be harder to sell quickly and may require long-term commitments.
• Less transparency: Valuations and performance data may not be as clear or frequent.

Because of these factors, fiduciary oversight will be critical in helping retirement savers decide whether these options are appropriate for their goals.

The Timeline for Change

This change won’t happen overnight. It could take years for regulators to finalize guidance, for custodians to build the necessary systems, and for retirement plans to decide to add these options—if they choose to at all.

The Executive Order directs the Department of Labor to review existing rules under ERISA (the federal retirement plan law) and work with the Treasury and the SEC to create a clearer framework for including alternative investments in 401(k) menus. This may involve developing “safe harbor” protections for plan fiduciaries who add such investments.

What This Means for You Right Now

For now, your 401(k) investment choices remain the same. The best step is to stay informed and focus on your current retirement strategy—one that matches your goals, time horizon, and comfort with risk.

If and when alternative options become available, you’ll want to understand the benefits, costs, and risks before deciding whether they belong in your portfolio.

The Bottom Line

This Executive Order opens the door to more investment choices in retirement plans, but the journey from policy to practice will be long. We’ll continue to monitor developments so you can make informed decisions about your financial future.

Connect with us to discuss your retirement strategy and how alternative investments in 401(k) plans could fit into your long-term goals.