The White House proposes risky changes to retirement funds

The White House has set a new policy direction for 401(k) investors. On August 7, 2025, President Donald Trump signed an executive order that instructs federal agencies to revisit the long-standing limits on alternative assets in defined contribution plans and to make it easier for plan sponsors to offer them. The text directs the Department of Labor and the Securities and Exchange Commission to reexamine guidance and reduce litigation risk that has kept most plans centered on public stocks and bonds. The order is titled “Democratizing Access to Alternative Assets for 401(k) Investors.”

At a high level, the order is an instruction, not a rule in itself. It does not immediately change ERISA or force any plan to add private equity, private credit, real estate, crypto, commodities or infrastructure funds. Agencies must still issue guidance or propose rules, and providers must decide what to offer. Several legal commentaries note that implementation will take time because fiduciary processes, product design and recordkeeping must catch up. In plain terms, this is the start of a regulatory process rather than the finish line.

The Department of Labor has publicly welcomed the policy direction and framed it as an expansion of choice for American workers. That endorsement matters because it hints at the tone of forthcoming guidance for plan fiduciaries. Sponsors, however, will wait to see the precise safe harbors and documentation standards that emerge before they change menus.

So why does this matter now. Most 401(k) lineups have been built around mutual funds and collective trusts that hold public stocks and bonds. The order signals that multi-asset funds inside 401(k)s may hold slices of private markets or even digital assets if fiduciaries can justify the structure, monitor the risks and disclose fees clearly. The White House fact sheet and subsequent reporting point to private equity, private credit, real estate and crypto as candidates that regulators will consider under clarified standards. None of this obliges a plan to add them, but it gives sponsors a clearer runway if they choose to.

There is a real split in professional opinion, and it turns on two questions. First, can private assets improve risk-adjusted returns for long-horizon savers if used in modest allocations within diversified funds. Second, can 401(k) systems administer these assets without saddling participants with higher, less transparent fees and harder-to-access money at the worst possible moments. Proponents emphasize the diversification, the potential for a smoother return path and access to opportunities that were previously confined to institutions or accredited investors. Critics underline that these assets are less liquid, rely on appraisal-based valuations, and have historically carried higher fees than mainstream index funds.

Fees and liquidity sit at the core of the risk case. A generation of retirement policy deliberately pushed fees down and favored daily priced, tradable funds. Private market fee stacks have been meaningfully higher, often described by a management-plus-performance model in contrast with public market funds whose average expense ratios sit near a quarter of a percent. Illiquidity is a design feature of private assets, not a bug, which can be hard to reconcile with daily-dealing 401(k) platforms and with participant expectations about access. These structural frictions are the reason many sponsors have stayed away and why any change will be slow and methodical.

The Institute for the Fiduciary Standard and several advisor groups have already raised alarms about complexity, transparency and the risk of introducing illiquid strategies into plans that ordinary workers rely on as their primary retirement vehicle. Their argument is not that alternatives never belong in a long-term portfolio, but that defaulting millions of savers into products with opaque costs and appraisal-based pricing contradicts the spirit of fiduciary duty in a mass-market plan. That is likely to be a major theme as agencies write and defend their guidance.

What has not changed is your basic responsibility as a saver and the plan’s responsibility as a fiduciary. If your employer eventually adds a target-date or balanced fund that includes private assets, the fund still must be evaluated under ERISA’s prudence and loyalty standards. The plan sponsor will need to examine whether the structure is appropriate for the demographics and contribution patterns of the workforce, and whether costs are reasonable for the expected benefit. None of those obligations are softened by the fact that the White House wants more options available.

If you are a mid-career professional, think about time horizon first. Private assets are engineered for long holding periods. That can be a feature if you have decades to go and if the exposure is wrapped inside a diversified, professionally managed fund that phases risk down as you near retirement. It becomes a bug if you are within ten years of retirement, depend on steady access to your savings, or have an uneven contribution history. The executive order does not change the reality that liquidity, fees and clarity of pricing matter most when life events force decisions.

Expect a slow rollout. Large recordkeepers and asset managers will pilot structures inside collective investment trusts or target-date funds because those wrappers can handle complex holdings better than a do-it-yourself brokerage window. Sponsors will watch litigation risk closely. The industry remembers cases where private or hedge exposures in a plan lineup led to years of lawsuits, even when courts ultimately sided with the fiduciaries. Agencies can reduce this fear by spelling out monitoring practices, disclosure standards and valuation expectations that count as prudent. Until then, early adopters will be cautious, and many plans will take a wait-and-see approach.

Here is how to translate the policy into personal planning without changing your entire approach overnight. Start with your contribution rate and your glide path. If your plan’s default fund evolves to include a small private allocation in pursuit of diversification and if fees remain reasonable, your core behavior still does the heavy lifting. Regular contributions, broad equity and quality bond exposure, and an allocation that steps down risk as you age are still the engine of retirement wealth. Added private exposure is a satellite, not the sun. If the private sleeve carries a much higher all-in cost or reduces daily liquidity at the fund level, you should expect the plan to explain how that tradeoff benefits you over time.

Next, examine disclosures with fresh eyes. In a public-market index fund, it is easy to see what you own and what you pay. Private market funds have layers of management and performance fees, portfolio company expenses and less frequent pricing. If your plan introduces a fund with alternatives, read the summary carefully and look for the total unit-level expense, the valuation methodology, the redemption rules and any gates or delays after requests. If any of those are unclear, ask your HR team or plan administrator to explain them in writing. That is not nitpicking. It is prudent behavior in a plan you will rely on for decades.

Finally, consider the role of age and risk capacity. Younger savers may reasonably conclude that a modest, professionally managed allocation to private assets could help diversify returns as part of a long glide path. Older savers and those with shorter or uncertain timelines may prefer to keep things simple and liquid. The order gives plans permission to explore new structures. It does not obligate you to embrace complexity if it does not fit your goals. A clear plan can still be a strong plan.

For plan sponsors and committees, the to-do list is straightforward even if the work is not. Map your workforce demographics, model cashflow needs, determine whether illiquidity fits your participant behavior, and test whether the expected net benefit justifies the additional fees. Build a monitoring program that is as rigorous for private sleeves as it is for public funds. Document valuation oversight and communication protocols. If the agencies offer safe harbors around selection and monitoring of private exposures inside multi-asset funds, adopt them precisely rather than broadly. That precision will be your best defense if your choices are later questioned.

The executive order changes the conversation, not the fundamentals. It points regulators toward wider access, and it asks fiduciaries to weigh new tools that might improve outcomes for some savers. It also places a greater burden on plans to prove that any added complexity genuinely serves participants. Savers should expect more choice over time. They should also expect better explanations about what that choice costs and how it works when markets turn. In retirement planning, simplicity and clarity still compound.