The recent executive order signed by former President Donald Trump, which opens the door for 401(k) plans to include cryptocurrency and private equity investments, represents a dramatic shift in the retirement landscape. For decades, retirement accounts have been anchored by the traditional mix of stocks and bonds, with alternatives like real estate, private credit, and private equity largely limited to institutional investors or the wealthiest households through private funds. Now, for the first time, the average retirement saver may gain access to asset classes once considered far too complex, illiquid, or volatile for mainstream portfolios.
For financial advisors and RIAs, this policy shift raises an important set of questions: Should clients embrace these new opportunities, or should the traditional stock-and-bond core remain the foundation of retirement planning? And perhaps more importantly, which clients, if any, stand to benefit most from exposure to these new asset categories?
The answers are nuanced. There is no one-size-fits-all solution, and advisors must balance return potential with risk management, liquidity constraints, and investor behavior. The possibility of incorporating crypto or private equity into retirement plans requires careful assessment, not only of the assets themselves but also of investor suitability, education, and long-term planning discipline.
The Case for Including Alternatives in 401(k)s
The push to open retirement accounts to new asset classes is rooted in both performance data and access.
In the case of cryptocurrency, advocates argue that outsized gains in recent years have left retirement savers at a disadvantage. Many retail investors, shut out of crypto exposure within their retirement accounts, sought exposure through taxable brokerage accounts, ETFs, or even direct holdings on crypto exchanges. While the asset class remains volatile, proponents suggest that small, diversified allocations could enhance long-term returns for retirement savers who can tolerate higher levels of risk.
Private equity and private credit present another compelling case. These markets have historically been the domain of pension funds, endowments, and ultra-high-net-worth investors, who have benefited from returns above public equity benchmarks over extended horizons. The growth of private credit in particular has been significant, driven by banks stepping back from middle-market lending and private firms filling the gap. Until now, retail investors have had limited opportunities to participate in these returns in a retirement context.
For retirement savers with decades ahead of them, the illiquidity premium offered by private equity and credit could represent an attractive long-term opportunity. As Rich Powers, head of private equity at Vanguard, explained in comments to Business Insider, the value proposition of private assets is most compelling when investors have the runway to let these strategies play out. Private markets often take years to realize gains, meaning those with shorter horizons may not see the benefits.
The Case Against
On the other hand, there are real and material risks in introducing these assets into retirement plans.
Cryptocurrency is notorious for its volatility, with double-digit drawdowns common within months or even weeks. While institutions have begun integrating digital assets into select portfolios, the lack of regulatory clarity, susceptibility to fraud and hacking, and extreme price swings make it a challenging fit for the average retirement saver.
Private equity and private credit, while less volatile in terms of market pricing, carry their own set of risks. These include limited liquidity, long lock-up periods, and less transparency compared to public markets. Valuations in private markets are often less frequent and more subjective, creating uncertainty about true portfolio values. Moreover, fee structures are typically higher than traditional mutual funds or ETFs, raising questions about net-of-fee outcomes for plan participants.
For many advisors, these factors underscore the importance of client education and realistic expectation-setting. Alternatives can enhance returns, but they can also create pitfalls for investors unprepared for the complexities.
Who Is Best Positioned to Benefit?
The most compelling case for including private equity and crypto in retirement accounts comes down to time horizon, risk tolerance, and investor discipline.
According to John Toomey, CEO of HarbourVest Partners, the playbook for alternatives should mirror the well-established lessons of stock and bond investing: diversification, patience, and a long-term focus. Investors who view private equity or crypto as speculative bets may face disappointment, while those who treat them as long-term allocations within a disciplined portfolio strategy are more likely to benefit.
Jason Lee, chief of enterprise at Chime, noted that the real winners are not necessarily those who chase the newest asset classes, but those who consistently review and adapt their portfolios over time. For certain clients, that may mean allocating a small portion of retirement savings to alternatives. For others, it may mean sticking with the basics and resisting the allure of less familiar opportunities.
For advisors, the question becomes less about whether these new asset classes should be embraced universally and more about which clients can responsibly integrate them into their retirement strategy. Younger clients with long time horizons, higher incomes, and greater tolerance for volatility may be the most natural fit. Near-retirees or those with more conservative profiles may be better served avoiding or minimizing exposure.
Practical Considerations for Advisors
Even with the executive order opening the door, advisors should not expect retirement plans to immediately or universally include private equity or crypto. Several practical considerations remain:
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Plan Provider Implementation
Plan sponsors and providers will determine whether, and to what extent, to add alternatives. While the executive order permits access, it does not mandate inclusion. In practice, adoption will vary, and many plans may opt to avoid the complexity altogether. -
Regulatory and Fiduciary Oversight
Fiduciaries of retirement plans face heightened scrutiny when selecting investment options. The inclusion of illiquid or volatile assets raises questions about fiduciary responsibility, particularly if plan participants are not adequately educated about the risks. Advisors serving as fiduciaries will need to weigh these obligations carefully. -
Education and Communication
One of the biggest hurdles in integrating alternatives into retirement accounts is investor understanding. Advisors must communicate clearly about liquidity restrictions, fee structures, valuation challenges, and potential volatility. Without robust education, the risk of misaligned expectations increases significantly. -
Portfolio Construction
For advisors who do integrate these assets, portfolio construction will be critical. Allocations should be modest, diversified, and sized appropriately relative to the client’s broader risk profile. For most retirement savers, alternatives should complement rather than replace the traditional stock-bond core. -
Liquidity Management
Particularly with private equity and private credit, liquidity planning becomes paramount. Advisors should ensure that clients maintain sufficient access to liquid assets, particularly as they approach retirement. Overexposure to illiquid holdings could create challenges in funding withdrawals or required minimum distributions.
Looking Ahead
The executive order is not a wholesale restructuring of the retirement landscape, but rather an expansion of what may be possible. As Jason Lee observed, it should be seen less as a mandate and more as a menu expansion. Plan participants will not be required to include crypto or private equity in their 401(k)s. For many, the best strategy will still be to stick with the “classics” of diversified public equity and fixed income allocations.
Rich Powers of Vanguard reinforced this point, noting that while private assets may be included in more retirement plans going forward, they are unlikely to dominate the lineup. For most investors, private assets will remain the exception rather than the rule, serving niche needs for those with the right profiles rather than becoming a universal allocation.
For advisors, this represents both a challenge and an opportunity. The challenge lies in helping clients navigate the complexity, avoid the pitfalls, and resist the temptation to chase returns. The opportunity lies in demonstrating value through thoughtful guidance, tailored strategies, and prudent allocation.
Conclusion
The inclusion of cryptocurrency and private equity in 401(k) plans marks a significant moment in the evolution of retirement planning. It opens new doors for diversification, but it also introduces risks that must be carefully managed. For advisors and RIAs, the responsibility is clear: evaluate each client’s suitability, educate thoroughly, and build portfolios that balance innovation with discipline.
For some clients, a small allocation to alternatives could enhance long-term outcomes. For others, staying the course with traditional allocations may remain the most prudent path. What is certain is that the role of the advisor becomes more critical than ever in navigating these choices.
The future of retirement planning may indeed include crypto and private equity—but only as tools thoughtfully applied, rather than as silver bullets.
