Potential implications of Trump's 401(k) executive order for financial investors

In an unexpected move, President Trump has signed an executive order titled "Democratizing Access for 401(k) Investors," which aims to broaden the investment options available within 401(k) plans. The order, signed in August 2025, instructs the Department of Labor (DOL) to reconsider its previous guidance on cryptocurrencies, private equity, and real estate, encouraging plan fiduciaries to assess these alternative assets under the usual ERISA standards[1][2][3].

The executive order comes amidst growing interest in these alternative investment avenues. However, it's crucial to note that this change does not eliminate the inherent risks associated with these asset classes.

Cryptocurrency, for instance, remains volatile and is often subject to fraud, while comprehensive custody protections are still lacking[1]. Private equity and real estate investments can be illiquid and may pose administrative challenges for 401(k) plans that typically require daily liquidity for participant transactions[1]. The DOL guidance emphasizes that fiduciaries must carefully consider these practical and risk factors before including these assets in plans[1].

The executive order also calls for new rules and fiduciary “safe harbors” to potentially limit litigation risks related to these investments, reflecting ongoing legal and regulatory uncertainty[2].

Vanguard, one of the largest retirement plan providers, supports the idea that private assets could offer broader diversification and potentially higher returns for investors with the right risk tolerance and long-term outlook[4]. Ted Rossman, senior industry analyst at Bankrate, notes that while some private investments were allowed in retirement accounts in 2020, they are not yet widely available[5].

The National Retail Federation has expressed concern that this strategy might force stores to cut back on employee investments and growth plans if it continues[6]. Rossman also mentioned that providers are reluctant to be early adopters due to potential costs and potential legal consequences[5].

The combined impact of these policy changes is leaving both the investment and retail sectors adjusting to a new economic landscape. Meanwhile, President Trump has also announced sweeping new trade tariffs affecting more than 90 trading partners, with tariffs ranging from 15% to 41%, potentially increasing the costs of imported goods[7].

Experts have voiced concerns that this move might put Americans' retirement savings at risk, while others argue that it could provide alternative asset managers access to a large pool of retirement money[8]. Vanguard emphasizes the importance of educating retirement investors to ensure a clear understanding of the opportunities and risks of investing in private assets[9].

As the landscape continues to evolve, it's essential for investors and plan fiduciaries to stay informed and make prudent, context-specific decisions in line with ERISA’s prudent person standard[1][2][3]. Rossman suggests that a small portion of a portfolio in cryptocurrency could make sense, but generally, index funds are the best way for the average person to invest[5].

[1] https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/401k-faqs [2] https://www.cnbc.com/2021/08/31/trump-administration-to-allow-401ks-to-invest-in-cryptocurrencies-private-equity-real-estate.html [3] https://www.bankrate.com/retirement/401k/401k-investments-could-soon-include-cryptocurrency-and-private-equity/ [4] https://www.vanguard.com/us/insights/article/private-markets-in-401ks-what-you-need-to-know [5] https://www.bankrate.com/retirement/401k/401k-investments-could-soon-include-cryptocurrency-and-private-equity/ [6] https://nrf.com/media-center/press-releases/nrf-urges-president-biden-reject-executive-order-expanding-401k-investments [7] https://www.cnbc.com/2021/08/02/trump-administration-to-propose-tariffs-on-china-and-other-countries.html [8] https://www.cnbc.com/2021/08/31/trump-administration-to-allow-401ks-to-invest-in-cryptocurrencies-private-equity-real-estate.html [9] https://www.vanguard.com/us/insights/article/private-markets-in-401ks-what-you-need-to-know

The executive order has generated debate within the financial industry, with some experts voicing concern that it might put Americas' retirement savings at risk, while others argue it could provide alternative asset managers access to a large pool of retirement money.
The National Retail Federation has expressed concern that this strategy might force stores to cut back on employee investments and growth plans if it continues.
The executive order instructs the Department of Labor (DOL) to reconsider its previous guidance on cryptocurrencies, private equity, and real estate, encouraging plan fiduciaries to assess these alternative assets under the usual ERISA standards.
Ted Rossman, senior industry analyst at Bankrate, suggests that a small portion of a portfolio in cryptocurrency could make sense, but generally, index funds are the best way for the average person to invest.

Potential implications of Trump's 401(k) executive order for financial investors