New Frontier for Retirement Funds: Alternative Assets Enter 401(k) Plans

A capital battle involving $12.5 trillion in retirement funds is about to begin. This policy, which allows alternative assets such as private equity, real estate, and cryptocurrencies to enter 401(k) retirement accounts, is not only a key step in reshaping the rules of the capital market, but also reflects the deep logic of the American financial industry.

Alternative assets enter 401(k) plan

According to reports, Trump will sign an executive order aimed at allowing private equity, real estate, cryptocurrency, and other alternative assets into the approximately $12.5 trillion 401(k) plan. The executive order will direct the Department of Labor to reassess the guidelines for alternative asset investments in retirement plans governed by the Employee Retirement Income Security Act of 1974. The Department of Labor will also be responsible for clarifying the government's fiduciary responsibility stance in providing asset allocation funds that include alternative assets.

It is worth noting that this move will also establish a cross-departmental collaboration mechanism. Trump has instructed the Secretary of Labor to work with the Department of Treasury, the U.S. Securities and Exchange Commission (SEC), and other agencies to study whether rule modifications are needed to promote this work, and has specifically requested that the SEC provide a convenient channel for participants to access alternative assets in self-managed retirement plans. This multi-agency collaborative directive is clearly aimed at breaking down existing regulatory barriers to pave the way for the large-scale entry of alternative assets into the retirement market.

401(k) Project Introduction

401(k) plan is a retirement savings plan offered by employers that allows employees to choose to have a portion of their salary deposited into an individual account under the plan for retirement savings. Employers typically also provide a certain percentage of matching contributions. The funds can be invested in low-risk assets such as funds and stocks.

In 2025, employees can contribute a maximum of $23,500 per year, with those aged 50 and above allowed to contribute an additional $7,500, and individuals aged 60 to 63 able to contribute up to $11,250. Employer matching contributions vary by plan. The total contribution limit for employees and employers is $70,000. Early withdrawals may incur a 10% penalty (unless specific exceptions are met), and withdrawals after retirement are taxed as ordinary income.

401(k) Project Scale and Its Potential Impact on Cryptocurrency

The 401(k plan is the largest employer-sponsored retirement savings plan in the United States. As of March 31, 2025, the total retirement assets in the United States amount to $43.4 trillion, of which $8.7 trillion is held in the 401)k plan.

In the 401(k) plan, the total assets managed by mutual funds amount to $5.3 trillion, accounting for 61% of the total. Equity funds are the most common type of fund, holding $3.2 trillion (36.7%), followed by hybrid funds, which hold $1.4 trillion.

After the new policy is implemented, if 1% of the 401(k) funds flow into the cryptocurrency market, it will bring an inflow of 87 billion dollars. This could generate a considerable demand for cryptocurrencies.

Policy Background Analysis

This initiative is a continuation and upgrade of Trump's economic policy. Trump's move is not merely an economic decision; it is also aimed at continuing to garner support from Wall Street. Private equity and hedge funds have always been important supporters of the Republican Party, and relaxing the 401(k) investment restrictions means these institutions will receive long-term stable capital inflows. In addition, Trump has recently frequently expressed support for cryptocurrencies and proposed establishing a strategic reserve for Bitcoin and a stockpile of digital assets. This policy directly responds to the core demands of the crypto community—integrating digital assets into the mainstream financial system.

Policy Impact and Potential Risks

The core of this executive order lies in breaking the investment boundaries of traditional retirement accounts. Supporters see this as a process of "democratizing" the capital markets, believing that it will give the working class the opportunity to share in the dividends of economic growth, while also injecting long-term stable funds into alternative asset industries and providing mainstream opportunities for emerging assets such as cryptocurrencies.

However, for the working class, this executive order presents both an opportunity to "break down investment barriers" and a challenge of "risk spillover." The essential attribute of retirement accounts is to preserve and increase value, which fundamentally conflicts with the high-risk nature of alternative assets. Most working-class individuals lack financial expertise and find it difficult to recognize the true risks of assets, potentially relying on the "packaged products" recommended by employers or financial institutions. Driven by interests, institutions may tend to exaggerate returns and downplay risks, leading the working class to passively bear excessive risks in an information asymmetry.

Cryptocurrency Policy Trends

Recently, the U.S. government has been releasing friendly signals, including the establishment of the first White House AI and cryptocurrency director, listing cryptocurrency as a national priority, creating a Bitcoin strategic reserve, hosting "Crypto Week," signing the stablecoin legislation "GENIUS Act," and publishing a report titled "Strengthening America's Leadership in Digital Financial Technology."

It is worth noting that several states in the United States have previously proposed cryptocurrency reserve bill drafts, planning to authorize a portion of retirement funds, retirement systems, or public funds that include retirement funds to be invested in Bitcoin. Most states have limited this investment ratio to 10%, but most bills have been rejected or are stalled due to recess.

Conclusion

As the 401(k) account evolves from a simple portfolio of stocks and bonds to a complex product that includes private equity and cryptocurrencies, financial literacy will become a key variable determining the success or failure of investments. Whether the regulatory system can establish an effective firewall to prevent the transfer of interests and systemic risks will be the ultimate test of the governance capacity of the U.S. capital markets.

In front of a massive $12.5 trillion cake, all participants are waiting for the final outcome of this capital game.