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Crypto and Alternative Assets in 401(k)s: What Retirees Should Know
The landscape of retirement investing is beginning to shift in a big way. Thanks to a new executive order signed by President Donald Trump, digital assets like cryptocurrencies — along with other alternatives such as private equity and real estate — could eventually be included in employer-sponsored 401(k) retirement plans.
While the move signals growing legitimacy for digital assets and broader diversification opportunities, it’s not something retirees (or soon-to-be retirees) should expect to take advantage of overnight. In fact, financial experts caution that the road ahead is long and layered with complications.
What’s Changing?
The executive order directs the Department of Labor to revisit fiduciary guidance related to alternative investments in defined contribution plans like 401(k)s. This includes not only cryptocurrencies like Bitcoin and Ethereum but also private equity, hedge funds, and real estate.
The aim is to modernize retirement plan options and expand access to higher-growth investment opportunities. Advocates argue that giving Americans more options could help improve long-term returns in retirement accounts — especially in an era of longer lifespans and potentially lower returns from traditional stocks and bonds.
However, several hurdles still stand in the way before these new investment choices reach your retirement account.
It’s Not Happening Overnight
Although the federal government is pushing for change, actual implementation falls to employers, plan sponsors, and recordkeepers — the companies and professionals who manage 401(k) plans. Many are still wary of the risks and complexities involved with alternative assets, especially cryptocurrencies.
Experts estimate it will take several quarters — possibly years — before most retirement plans begin offering crypto or private market exposure. As Jason Kephart of Morningstar put it, “We’re still very much at ‘day one.’”
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Why the Delay?
There are several reasons for the slow rollout:
Fiduciary responsibility: Under the Employee Retirement Income Security Act (ERISA), employers must act in the best interest of plan participants. Introducing high-risk, volatile assets like crypto could expose them to liability if participants lose money.
Complexity: Assets like private equity or crypto require special handling in terms of liquidity, valuation, and regulation. That complexity makes them more expensive and less transparent than traditional mutual funds or ETFs.
Investor confusion: Too many choices can actually reduce participation. Retirement experts warn that flooding 401(k) menus with complex options could overwhelm savers — especially older investors — leading them to avoid making choices altogether.
How Might Crypto and Alternatives Appear in 401(k)s?
Don’t expect to see options like Bitcoin or real estate funds as standalone investments in your retirement plan any time soon. Instead, they’re more likely to be included within target-date funds or managed accounts — pooled investments where a professional handles asset allocation.
This structure could help smooth out volatility and ensure that professional oversight is part of the package. For example, a target-date fund aimed at those retiring in 2035 might allocate a small portion of its assets to private equity or crypto.
These types of vehicles already exist in the retirement space and are expected to be the most likely path forward for introducing alternatives.
Costs and Risks
One of the biggest drawbacks to alternative assets is cost. While traditional index funds might charge annual fees as low as 0.10%, private market investments often start at 1% or more, not including additional incentive or performance-based fees.
Chuck Failla, a certified financial planner, noted that such investments may only be appropriate for “accredited investors” — those with $1 million or more in net worth — due to their illiquidity and risk.
There’s also concern that the very steps taken to make alternatives compatible with 401(k)s — such as using interval funds or cash buffers — could dilute returns, making them less worthwhile for the average investor.
A Boon for Diversification?
Still, some financial professionals see potential benefits. The public markets today are heavily tilted toward large-cap companies, and many promising firms stay private longer. Private markets, some argue, offer a chance at outsized returns, or “alpha,” not always available through standard stock and bond funds.
Tony Roth, chief investment officer at Wilmington Trust, believes private market exposure could improve diversification in retirement portfolios — if handled correctly.
What Should Retirees Do?
For retirees and near-retirees, the message is clear: be cautious but stay informed. While alternative investments may offer greater upside, they come with significantly more risk and complexity.
Here are a few key takeaways for retirees:
Don’t rush in. Crypto and alternatives in 401(k)s are not yet widely available, and it may take years before they are.
Know your plan. Even when available, these investments may only be part of managed accounts or target-date funds — not individual options you can pick freely.
Watch the fees. High costs can eat into returns, especially when compounded over years.
Seek advice. If your plan begins offering alternative investments, speak with your financial advisor or plan representative to understand the implications.
Keep your risk profile in mind. At or near retirement, protecting what you’ve saved may be more important than chasing higher returns.
The government’s push to bring alternative assets — including crypto — into retirement plans is a major step in legitimizing these options. But for retirees, this development is more symbolic than immediately actionable.
For now, the best course of action is to stay informed, evaluate risks carefully, and consult with professionals before adjusting your portfolio.
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