For as long as most people can remember, 401(k) plans have been built around a familiar lineup of mutual funds, target-date funds, and possibly a stable value or money market option. These investments are designed to be easy to buy and sell, valued daily, and relatively straightforward to understand.

But that might be changing soon with a recent 401(k) rule change. In August 2025, President Trump signed an executive order directing the Department of Labor (DOL) to open the door for “alternative assets” in 401(k) plans, such as cryptocurrency and private equity. For retirement savers, this could be one of the biggest changes in decades, offering access to investments that may be highly volatile, illiquid and sometimes reserved for the ultra-wealthy. However, more options also mean more opportunities and risk.

How 401(k) Investments Worked Until Now

Historically, 401(k) plan investment options have stuck to:

• Publicly traded securities, such as stock and bond mutual funds or ETFs, which can be tracked in real time.
• Daily liquidity so you can move money around whenever you want.
• Transparent pricing that is easy to check without guesswork.

Why haven’t alternatives been available in 401(k) plans before?

• High volatility, for example crypto currency which can lose double-digit percentages in a single day.
• Valuation challenges, because private companies do not have a stock ticker and aren’t traded on public markets, making pricing less straightforward.
• Fiduciary concerns, since under ERISA law, employers must act in employees’ best interests, and riskier, harder-to-monitor assets make that responsibility more difficult.

It’s worth noting: back in 2022, the DOL went as far as telling plan sponsors to use “extreme care” before adding crypto.

What’s Changing in 401(k) plan lineups

The executive order may lead to changes in what types of investments are being offered in 401(k) plan lineups:

• Gives the DOL 180 days to release updated guidance on adding alternatives.
• Removes old crypto-specific warnings from official regulations.
• Allows, but doesn’t require, plan sponsors to offer them.

That last part is key. Even with this rule change, your employer decides whether these options appear in your plan, and some may wait years before adding them.

What Are Alternative Assets?

It’s a bit of a buzz word these days, but the term “Alternative Assets” actually means something, it is an asset class reserved for investments which don’t typically fall into the two main categories of stocks or bonds. The two alternative asset types in the spotlight now are:

Cryptocurrency

Digital assets like Bitcoin and Ethereum. They’ve had huge runs and massive drops. Bitcoin, for example, climbed from about $20,000 in mid-2022 to over $60,000 in 2024, but it also fell more than 70% during 2021–2022. It’s 24/7, global, and highly speculative.

Private Equity

Investments in companies that aren’t publicly traded. Usually, you pool money with other investors to buy, grow, and sell businesses. Some private equity funds have posted 12–15% annualized returns in certain periods, but your money could be tied up for 7–10 years, and the “2 and 20” fee structure (2% annual fee plus 20% of profits) can take a big bite.

Why This Could Be a Good Thing

• Higher return potential where certain alternative assets have outperformed traditional markets during specific periods.
• Diversification, since they often move independently of stocks and bonds, potentially reducing long-term volatility.
• Expanded access because until now, private equity and similar investments were mostly reserved for accredited investors and large institutions.

But There Are Serious Risks

• Extreme volatility: Crypto can be up 15% one day and down 20% the next.
• Illiquidity: Private equity funds may hold your money for nearly a decade.
• Valuation challenges: Without daily pricing, it is harder to know what your investment is worth.
• High fees: Private equity expenses can take a significant cut from returns.
• Regulatory uncertainty: Rules for crypto and other alternatives can shift quickly.
• Fraud risk: Less oversight in some markets increases the chance of scams.

How to Approach Alternatives in a 401(k)

Just because something’s available doesn’t mean you should jump in. Before committing:

• Know your time horizon – If retirement is 5–10 years away, locking up funds may not make sense.
• Assess your risk tolerance – Would a 50% drop make you panic?
• Think about portfolio fit – Alternatives should be a complement, not the core of your strategy.

If your plan does add them

• Read the fine print – Understand lock-up periods, strategies, and all fees.
• Start small – Even 1–3% of your account can provide exposure.
• Diversify – Don’t put your entire “alternative” allocation into one investment type.
• Check in regularly – Review annually to see if it’s still aligned with your goals.
• Talk to a fiduciary advisor – Get a professional opinion on whether these assets fit your plan.

Employers and Fiduciary Responsibility

If a plan sponsor chooses to offer alternatives, they’ll take on extra responsibilities under ERISA:

• Selecting and monitoring investments closely.
• Keeping fees in check.
• Educating participants about risks.

Some may only allow alternatives through a self-directed brokerage window or place caps on how much you can allocate.

Bottom Line

This policy shift could bring entirely new asset classes into everyday retirement accounts. That’s exciting, but it’s also a reason to slow down, learn the landscape, and make decisions that fit your personal financial picture. For most people, alternatives should be a small slice of a larger, well-diversified portfolio. They can add growth and variety, but they also demand patience, a strong stomach for volatility, and a
willingness to do your homework.

If you’re curious about whether cryptocurrency, private equity, or other alternatives make sense for your 401(k), Navalign Wealth Partners can walk you through the pros, cons, and trade-offs, helping you invest with confidence and clarity.