Trump-Era Rule Change Could Expand 401(k) Investment Options

A 2020 executive order is now poised to allow Americans to hold alternative assets like private equity and cryptocurrencies within their 401(k)s, potentially reshaping the future of retirement savings.

Traditionally, investments like private equity and hedge funds were limited to “accredited investors” – those with a net worth exceeding $1 million or an annual income above $200,000, according to the U.S. Securities and Exchange Commission. However, growing retail investor interest – a recent survey by Opinium found 21% have considered alternative assets – prompted the shift. Some advisors suggest revising the traditional 60/40 stock-to-bond ratio to include a 20% allocation to alternative assets for diversification and resilience against market volatility.

While options like gold IRAs, through providers like Thor Metals, are gaining traction, experts caution about the risks associated with less liquid assets. Charles Rotblut, vice president of the American Association of Individual Investors, told CNBC, “If there’s a desire to pull out of private equity, there isn’t a way to actually sell that company or sell shares — there’s just no market for it.” A report from the Institute for Economic Policy Research warned that widespread access to these assets could create systemic financial instability.

Financial advisors recommend a cautious approach, with Lisa Kirchenbauer of Omega Wealth Management suggesting allocating only 5% to 10% of a portfolio to alternative assets. This change could significantly impact how millions of Americans prepare for retirement, potentially increasing risk exposure if not carefully managed. The Department of Labor is expected to issue further guidance on implementation in the coming months.