President Trump recently signed an executive order that could change how Americans save for retirement. For decades, 401(k) retirement plans have offered a narrow set of options for investment, tending to limit themselves to stocks, bonds and mutual funds. These investments have been considered safe and relatively straightforward for both employees and employers, with the latter concerned that anything more complex could potentially invite litigation. But with this new directive, the Trump administration is proposing something very different, which includes opening the door to alternative assets such as private equity, real estate and crypto as part of 401(k) retirement plans.
For everyday savers, the question will be whether these assets make sense as part of a retirement portfolio. For someone with a deep interest in real estate and the future of crypto, I believe it’s worth taking a closer look at what this might mean.
401(k)s and the new Executive Order
A 401(k) is one of the most common ways United States citizens save for retirement. These accounts are sponsored by employers and allow workers to contribute part of their paycheck before their salary gets taxed. Employers can match some of those contributions, and the money is invested on behalf of the employee. Traditionally, the investment menu in a 401(k) has been limited to publicly traded stocks, bonds, and mutual funds. The idea has been to keep choices straightforward and relatively safe, while protecting employers from lawsuits under ERISA, the federal law that requires them to act in their workers’ best interests. But the new executive order changes bring new assets into conversation.
The recently signed Executive Order, titled “Democratizing Access to Alternative Assets for 401(K) Investors” directs federal agencies, including the Department of Labor and the Securities and Exchange Commission, to make it easier for retirement plans to offer alternative investments as part of 401(k) retirement plans, including cryptocurrency, real estate, private equity, commodities and infrastructure funds. The goal is to give ordinary savers access to investments that, until now, have largely been out of reach. That doesn’t mean employees will see crypto or real estate funds appear in their retirement accounts tomorrow. New products have to be developed and regulators need to set guidelines. But the signal is clear: retirement savers should expect more variety in the years ahead, along with the opportunities and risks that come with it.
Is real estate still a strong investment option?
Real estate has always been viewed as a solid, long-term investment option, as it tends to offer gradual appreciation, perhaps rental income, and protection against inflation. On the surface, it makes sense that policymakers would want to bring this option into retirement accounts. But not all real estate is created equal, and the current market presents challenges for anyone thinking of it as a blanket solution. Residential real estate, for example, is facing a significant affordability problem. Home prices remain high, and when you add rising mortgage rates, property taxes, and soaring insurance premiums, ownership has become unattainable for many middle-income families. As such, as things stand, the idea of channeling retirement savings into broad residential funds could be risky.
Commercial real estate faces its own headwinds. Office space is struggling due to the shift to hybrid or remote work models, a structural change introduced following the pandemic that has left large parts of the market underutilized and difficult to repurpose. That said, not all areas of real estate are under pressure. Real estate such as warehouses and data centers are still in demand as companies expand e-commerce and digital infrastructure. These niches could make sense as part of a diversified retirement portfolio. If real estate does become a standard option in 401(k)s, my view is that it should be in these more resilient and forward-looking sectors, rather than in overvalued residential housing or struggling commercial office space.
The future of crypto as part of your 401(k) retirement plan
Cryptocurrency is the other major alternative asset highlighted in the Executive Order, and here too the opportunities and risks are very different from traditional retirement investments. Bitcoin in particular, has evolved into an asset many now see as a legitimate store of value, aside from its utility as nature as a form of payment. In fact, over the past decade, it has been the best-performing liquid asset, despite its volatility. Funnily enough, I used to be slightly skeptical of crypto myself, but I’ve come to see its strengths. Bitcoin is divisible, portable, durable, and scarce, which positions it well alongside traditional stores of value like gold.
Traditionally, what it has lacked is fungibility, that is, the ability to be used easily in everyday transactions. That’s changing. Through solutions like ForumPay, we are helping merchants and businesses accept crypto while receiving their preferred fiat currency as payment, which increases its liquidity and strengthens its case as a long-term asset. While I do believe crypto is an asset that is worth investigating, I don’t think retirement savers should load up their 401(k) retirement plans with crypto. Its price can swing sharply in the short term, and regulation is still catching up. But as adoption grows and crypto becomes more integrated into financial systems worldwide, I believe it has a role to play in a diversified retirement portfolio, providing exposure to one of the most innovative financial assets of our time.
For more insights and reflections from me on business, investment and real estate, take a look at the other articles on my blog, visit my YouTube channel and follow @williamerbey on social media.
