A Wider Menu for Retirement Savers: What's Been Proposed and How to Make Sense of It

A year ago this month, the President signed an executive order called Democratizing Access to Alternative Assets for 401(k) Investors. "Alternative assets" is a label for investments you can't buy on a public stock exchange: ownership stakes in private companies, loans made directly to businesses, real estate, infrastructure like pipelines and data centers, commodities, and crypto through managed funds. State pension funds have held these for decades. Your workplace retirement plan almost certainly doesn't, and this order is meant to change that.

The reason your 401(k) menu is limited is that your employer picks the funds in your plan and can be sued personally if the choice looks bad later. More than 500 lawsuits have been filed over retirement plan fees since 2016, with over $1 billion paid to settle them. So, HR sticks with what's familiar. The order tells the Labor Department to reduce that legal exposure, and in March the department proposed a rule giving employers a checklist: do this homework before choosing a fund, and a court should give you the benefit of the doubt. A final version of the proposal is expected near the end of this year and could look different.

Things to keep in mind as you evaluate what this proposal could mean for you:

Considerations:

• Access. Pension funds, endowments and wealthy individuals have used these investments for decades. Ordinary savers were left out largely by accident of legal risk, not by any finding that the investments are unsound.
  
• Long-term performance. A widely cited study found private equity beat the stock market by at least 3% a year across the 1980s, 1990s, and 2000s.
  
• Diversification. These investments don't rise and fall in step with the stock market, so a modest slice can steady a portfolio when stocks fall.
  
• Fewer public companies to invest in. A great deal of business growth now happens privately, and a stock index simply doesn't reach it.
  
• Professionally managed. Supporters note these would be folded into professionally managed funds rather than offered as standalone options for people to pick blind.
  
• Second look at eligibility rules. The order also asks the SEC to revisit who qualifies to buy private investments, a test that is mostly based on how much money you already have.

Cautions:

• The cost is higher, and it compounds. The average target date fund in a 401(k) charges about 0.29% a year. Private funds typically charge around 1.5%, plus a share of any gains. Returns are reported after fees, so the fund has to earn enough extra to cover that difference. Here's the stakes: $10,000 growing at 7% for thirty years reaches about $76,000. At 6% it reaches about $57,000. One percentage point costs roughly a quarter of your balance.
  
• Recent returns haven't kept up. MSCI clocked US private equity at 5.8% a year from 2022 through late 2025 against 11.6% for the S&P 500. Retail-style versions trailed stock indexes in 2025. The industry's answer, from firms with a stake in it, is that past slow stretches were followed by rebounds.
  
• The higher return may not reach you. With direct-lending funds, researchers find the gross returns are there but it's possible management fees and profit-sharing can absorb it.
  
• The value on your statement is an estimate. Private companies don't trade on an exchange, so there's no real-time price. Someone appraises them every few months, often someone paid based on the result. The number you see may not be what the investment would actually sell for, and losses can take months to appear.
  
• Diversification isn't automatic. You can't buy a broad index of private companies the way you can with stocks, so a fund holding ten of them may be less spread out, not more.
  
• The legal protection cuts both ways. Morningstar warned the checklist could let employers rely on advice from the firms with the most to gain from the answer.

Worth knowing: this order covers workplace plans, not IRAs. Self-directed IRAs, traditional and Roth, have allowed private companies, real estate and similar investments for years. If you have an old 401(k) at a former employer, you can generally roll it into one and buy those things today. Expect that pitched harder this year, and understand the tradeoff. A workplace plan comes with someone legally obligated to vet the fund. A self-directed IRA custodian typically performs no due diligence and gives no advice. More freedom, and nobody standing between you and the deal.

Three practical steps:

1. Open your plan's annual fee disclosure when it arrives and see whether the number moved. If your savings sit in a target date fund, that's where any change would appear first.
   
2. Pay attention to your target date fund, since that's where any change would show up first.
   
3. Ask your benefits contact whether the committee is considering private investments, what they'd cost, and how they'd be valued.

This may turn out to be a genuine improvement for ordinary savers. Whether it does depends almost entirely on the price and the terms, and those are the details worth your attention.