President Donald Trump is gearing up to open the U.S. retirement market to something it’s never before seen: Crypto, gold and private equity.
The president is set to sign an executive order that would open up 401(k)s to investments beyond just traditional stocks and bonds, the Financial Times reported.
Why It Matters
Historically, retirement investments have been limited to traditional stocks and bonds.
While opening up the market to alternative investments could help some seniors live a more comfortable retirement, it could also carry more risk due to the different nature of crypto and private equity markets.
Newsweek reached out to the White House for comment via email.
What To Know
If Trump signs the executive order, regulatory agencies will investigate what additional steps would need to be taken for the alternative investments to be included under 401(k)s, which operate as employer-sponsored retirement accounts.
This means the Department of Labor and the Securities and Exchange Commission would be responsible for instructing employers on how to incorporate investments in crypto, gold and private equity.
While supporters of the shift say it will yield higher returns than the current more conservative retirement accounts, others say it brings on unnecessary risks.
“With so many people so far behind on investing for retirement, it is easy to see the allure of adding crypto and private equity into their investment mix,” LendingTree’s chief consumer finance analyst, Matt Schulz, told Newsweek. “However, that potential for great rewards comes with great risk. It isn’t something that should be entered into lightly, especially if you’re nearing retirement age.”
The administration told the Financial Times they are seeking to safeguard the “economic future” for retirees.
“President Trump is committed to restoring prosperity for everyday Americans and safeguarding their economic future. No decisions should be deemed official, however, unless they come from President Trump himself,” the White House said in a statement to the publication.
Americans have used 401(k) plans to invest part of their salaries in stocks and bonds tax-free. But cryptocurrency investments have remained out of the question, despite Trump’s support for these types of investments.
Trump has long been a proponent of crypto investments and has voiced concerns over strict regulations of that market. In May, the Labor Department undid a Biden-era push to block cryptocurrencies investments from 401(k) plans.
If the executive order is issued, hundreds of billions of dollars would likely be available in new industry assets.
“Ultimately, it is all about your risk tolerance. If you know what you’re getting into and you’re willing to roll the dice in search of greater returns, have at it,” Schulz said. “However, for most people, crypto and private equity might be a bridge too far when it comes to risk.”
What People Are Saying
Jason Fichtner, the executive director of Retirement Income Institute, told Newsweek: “Expanding opportunities for people to invest their retirement contributions in a broader portfolio of assets will allow for greater diversification and, hopefully, a greater risk-adjusted return over the long term. The key to any retirement investment strategy is to diversify and not place too much in any one asset class, and to rebalance to less risky assets as one nears and enters retirement.”
LendingTree’s chief consumer finance analyst, Matt Schulz, told Newsweek: “It is OK to give people more options when it comes to investing for retirement. However, in doing so, you’re ramping up the pressure on people to understand what these complex, often-hard-to-understand financial instruments actually are. If people don’t understand what they’re investing in, it dramatically increases their chances of making poor decisions or getting taken advantage of by people who know more than they do. That’s a scary thing when you’re talking about people’s retirement savings.”
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “For decades, your retirement money’s been stuck in vanilla index funds while the rich made fortunes in private markets. I’ve also watched clients with $100+ million net worth get access to private equity deals returning 15-20 percent annually while their 401(k) neighbors scraped together 7 percent. Now? That door’s about to swing wide open.”
What Happens Next
Ryan said the move by Trump would be “revolutionary” for the financially literate with strong risk management. But for the everyday American, its long-term impacts remain unclear.
“The average American couldn’t explain blockchain if their pension depended on it, which it literally might,” Ryan said.
“I’ve seen retirees lose sleep over 2 percent market dips. Imagine explaining to your 67-year-old mom that their crypto allocation just lost half its value because Elon tweeted about his breakfast.”
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