Trump Signs Executive Order Opening 401(k) Retirement Market To Crypto Investments

President Trump is set to sign an executive order opening up 401(k) retirements plans to alternative assets, like private equity, real estate, and cryptocurrency. The move has the potential to unlock trillions in new investment for asset managers outside of stocks, bonds, and cash, 'though critics say it also could bring too much risk into retirement investments,' reports Reuters. From the report: 'The order directs the Securities and Exchange Commission to facilitate access to alternative assets for participant-directed defined-contribution retirement savings plans by revising applicable regulations and guidance,' the White House official said on condition of anonymity. The order directs the Labor Secretary to consult with her counterparts at the Treasury Department, the SEC, and other federal 'regulators to determine whether parallel regulatory changes should be made at those agencies,' the official said.

The new investment options carry lower disclosure requirements and are generally less easy to sell quickly for cash than the publicly traded stocks and bonds that most retirement funds rely on. Investing in them also tends to carry higher fees. In defined contribution plans, employees make contributions to their own retirement account, frequently with a matching contribution from their employer. The invested funds belong to the employee, but unlike a defined benefit pension plan, there is no guaranteed regular payout upon retirement.

Many private equity firms are hungry for the new source of cash that retail investors could offer after three years in which high interest rates shook their time-honored model of buying companies and selling them at a profit. Whatever results may come from Trump's order, it likely will not happen overnight, private equity executives say. Plaintiffs' lawyers are already preparing for lawsuits that could be filed by investors who do not understand the complexity of the new forms of investments.

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