Private Equity, Crypto and Other Risky Assets Are Coming to Your 401(k). Here's What to Know
Last week, the U.S. Department of Labor rolled out a framework intended to make it easier to invest in private equity right from your retirement accounts.
"This is how we will unlock and unleash the full potential" of the more than $12 trillion Americans have in 401(k)s, assistant secretary Daniel Aronowitz said in a media announcement.
The rule was developed in response to an August directive from President Donald Trump to figure out how to make alternative assets — a catch-all term for assets other than stocks and bonds traded on public exchanges that includes private credit, real estate, commodities, cryptocurrency and even collectibles — more readily available in retirement accounts. Proponents say alternative assets can diversify portfolios and provide growth, particularly as the number of public companies has fallen by about 3,000 over the past three decades.
Until now, the threat of litigation has prevented widespread adoption. The hangup is that employers are fiduciaries, meaning they have a legal obligation to act in the best financial interest of workers who own those 401(k) accounts. Big 401(k) providers often act as fiduciaries when employers hire them to manage these plans and provide investment advice.
The new Labor Department rule creates a safe harbor provision to reduce the likelihood that an employer or plan administrator could be sued if workers lose money investing in private equity, crypto or other alternative assets. The rule also introduces a six-point template for evaluating these assets, including performance and performance benchmarks, fees, liquidity, valuation and complexity.
"We are not telling any fiduciary out there to invest in private credit or not to invest in private credit. We just give responsible fiduciaries the toolkit so that they can analyze in an objective way," officials said on a March 30 media call.
While it's hard to gauge how widespread alternative assets could become in 401(k) plans, there's growing interest in the idea. In a 2025 survey from Schroders, 45% of retirement savers said they would buy private equity with their 401(k) money, a sharp jump from the 36% who said the same in 2024.
When could private equity come to your 401(k)?
The proposed rule is open to public comment for a 90-day period, after which the Labor Department will write the final version. Investing pros say it could take considerably longer, however, before most people will actually be able to buy private equity or bitcoin with their 401(k)s.
The rule reduces the likelihood that an employer or 401(k) administrator could be sued if workers lose money investing in private equity, crypto or other alternative assets. But the risk of litigation isn’t the only barrier to adoption: While the new rule provides a measure of legal protection, there are still administrative and regulatory challenges to creating financial tools that conform to all of the existing retirement-account policies.
Some believe private equity and other alternative assets could come to retirement accounts as early as the end of this year or early 2027.
"It could be as soon as six to nine months, or it could be one to three years," says Stephanie Williams, senior wealth Advisor and partner at AlphaCore Wealth Advisory. "It depends on the volume and complexity of the comments."
After the government works through and incorporates those, Williams predicts that the transition could be relatively rapid.
"Alternatives are available" already, she says. "They've been available to institutional investors and pensions, [and] to individual investors who are working with advisors, for return and diversification purposes," she points out, which means that investment companies won't be building these products from scratch.
Gregory Collier, founder of Collier Financial Solutions in Mount Dora, Fla., hypothesizes that the most likely place for these opaque, illiquid assets will be bundled into target date funds. These instruments already adjust to lower risk over time, so gradually dropping the amount of private-asset exposure as people get closer to retirement could happen in a similar fashion, he says.
What are the biggest risks of private equity in a 401(k)?
Any investment carries risk, but this risk can be harder to identify, let alone measure, for alternative assets for a number of reasons, starting with the fact that it's hard to even figure out how much they're worth at any given point in time.
"You can't get… the actual, market-determined value for that investment," says Kaush Amin, head of private market investing for U.S. Bank Wealth Management.
As such, Deanna Wise, Louisville, Ky.-based senior manager of insurance and retirement solutions at Baird, says you should take on the "personal responsibility to make sure you're understanding the risks you’re taking," she says.
Here are the primary factors that concern experts about including alternative assets in 401(k)s:
1. Transparency
Alternative assets are notoriously opaque.
"These securities don’t have a liquid market," Amin says. Valuations will "be based on a model rather than a market value," he adds, which will make it harder for retirement savers to know how much their nest eggs are actually worth in real time.
Even Wall Street gets nervous when it doesn't know how much an asset is actually worth. Jitters about private equity valuations have triggered a groundswell of investors looking for the exits in recent weeks. Investors in two of Blue Owl Capital’s biggest funds tried to take out a combined $5.4 billion in the first three months of the year, the Wall Street Journal reported.
Some think this alone should be a dealbreaker.
“Anyone who cares about the financial security of working people should oppose this proposed rule,” Sen. Elizabeth Warren, D-Mass., said in a recent statement.
2. Liquidity
Buying and selling the mutual funds, ETFs and target date funds that make up the bulk of 401(k) investments is easy because both the funds and the underlying securities they contain are highly liquid: There are always buyers and sellers, and how much these assets are worth is cut-and-dried.
Pricing — not to mention selling — alternative assets isn’t nearly as straightforward. Workers, especially those nearing or in retirement, need to be able to cash out on their own timeline, but investments like private equity can keep money tied up for several years at a stretch.
The prospect of not being able to get your money out when you want it is one of the biggest worries for 401(k) investors. As such, it's one of the biggest problems plan providers will have to solve as they figure out how to integrate these assets into people’s retirement portfolios.
3. Volatility
While the performance of straightforward index funds — which hold stock of every company in, say, the Dow Jones Industrial Average or the S&P 500 — can be expected to reliably track the performance of that index over time, there's a huge amount of variability in alternative asset performance, Williams says.
Proponents of adding these assets to 401(k)s say that's the point: If stocks tank in a bear market or recession, so-called non-correlated assets that aren't subject to the same market risks or cyclical forces may still provide growth.
But more so than for straightforward products like mutual funds, individual company stocks or government bonds, that growth depends heavily on the skills of the individual people managing those investments. The devil is in the details when it comes to how alternative assets are bought, sold and valued — and those details are certain to be complex.
4. Costs
Their inherent complexity also raises the cost of these investments. Retirement plan providers will also have to make sure that the returns people can expect to earn will justify the management fees investment companies will charge — which are expected to be steep — potentially above 2%.
By contrast, management of a plain-Jane, passive index fund might only cost 0.1%.
The long time horizon typical of these investments means that managers could be collecting hefty fees for years before investors reap the benefits — if they realize those gains at all. What’s more, the promises of big returns don't always pan out, according to a study from Johns Hopkins Carey Business School.
Collier predicts that 401(k) plans will be set up to limit private assets to a certain maximum percentage: “I think what they’ll do is limit the amount of alternatives you can have in your portfolio based on age,” he says. “That would be a good guardrail.”
But he and other investing pros worry that whatever safeguards are implemented might not go far enough to protect workers’ nest eggs.
"People should have choices, [but many] 401(k) participants are living paycheck to paycheck,” Collier says. Unlike professional portfolio managers, workers can't afford to make a risky investment that doesn't pan out.
“If you make a mistake and lose money, you have to live with that,” he says.
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