President Donald Trump signed an executive order on Thursday that paves the way for millions of Americans to invest their 401(k) retirement savings in high-risk assets like cryptocurrencies, private equity, and real estate. The directive, aimed at loosening restrictions under the Employee Retirement Income Security Act (ERISA) of 1974, could tap into the $12.5 trillion held in 401(k) accounts, a major win for industries long seeking access to these funds.
The order instructs the Labor Department to review fiduciary guidance within six months, potentially redefining what qualifies as a prudent investment for retirement plans. While no immediate changes will occur, the move signals a shift toward offering workers broader investment options through mutual funds, target-date funds, or collective investment trusts. Employers, however, may take years to adopt these options, as firms like Fidelity and Vanguard emphasize the need for investor education on risks.
The private equity sector, valued at $5 trillion, and the cryptocurrency industry, which heavily backed Trump’s 2024 campaign, stand to benefit significantly. Bitcoin surged 2% to $116,542 on Thursday, nearly doubling since Trump’s election, reflecting market enthusiasm. Unlike stocks and bonds, private equity offers higher average returns—13% annually since 1990 compared to the S&P 500’s 10.6%—but is less liquid, often locking funds for years. Cryptocurrencies, prone to 10% daily swings, contrast sharply with the stock market’s stability, raising concerns about volatility.
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Critics, including consumer advocates like Senator Elizabeth Warren, question the suitability of these assets for retirement plans, citing high fees, illiquidity, and risks. The Biden administration had urged “extreme care” with crypto due to its volatility, a stance now reversed. Meanwhile, industry leaders like Blackstone’s Steve Schwarzman and Swan Bitcoin’s Cory Klippsten see the move as a game-changer, particularly for younger, tech-savvy investors seeking diversification.
The Managed Funds Association welcomed the order, advocating for a framework balancing opportunity with investor protections. As regulatory changes unfold, adoption by plan providers and employers will determine how soon these assets become mainstream in 401(k) plans.
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