401(k) Expansion: Passive Mortgage and Private Credit Investments Now Within Reach

On August 7, 2025, President Donald Trump signed an executive order aimed at dramatically expanding the investment options available to millions of Americans participating in 401(k) retirement plans.

If fully implemented, this directive could revolutionize retirement investing by allowing private equity, real estate, infrastructure, commodities, and even cryptocurrencies to become accessible components within 401(k) portfolios—an unprecedented shift away from the traditional reliance on stocks, bonds, and cash equivalents.

This move has generated widespread attention across the financial industry and among retirement savers, as it promises to democratize access to alternative asset classes that have, until now, largely been the exclusive domain of institutional investors and ultra-high-net-worth individuals.

However, as with any innovation, there are potential rewards as well as risks that investors should understand before embracing these new options.

What Does the Order Do?

At its core, the executive order directs the Department of Labor and other federal agencies, including the Treasury and Securities and Exchange Commission (SEC), to review and update the fiduciary rules under the Employee Retirement Income Security Act (ERISA). The goal is to clarify how plan sponsors—typically employers and retirement plan administrators—can incorporate alternative investments into their offerings without violating their fiduciary responsibilities.

Key elements of the order include:

-Reviewing fiduciary guidance to provide clear standards for selecting and monitoring private assets in 401(k) plans.

-Removing previous restrictions placed during the Biden administration, which discouraged the inclusion of private assets due to concerns about complexity and investor protection.

-Encouraging regulatory agencies to collaborate on rulemaking that enables safe and compliant inclusion of alternatives such as private equity, real estate, infrastructure, and digital assets like cryptocurrencies.

These steps pave the way for 401(k) participants to access a broader universe of investments, potentially unlocking new growth and diversification opportunities.

Democratizing Access to Alternatives

Currently, most 401(k) plans limit participants to publicly traded mutual funds, index funds, and bonds—assets that are liquid, relatively transparent, and easily priced daily. Private markets, however, encompass investments like private equity funds, private credit, real estate investment trusts (REITs), infrastructure projects, commodities, and digital currencies. These assets have historically been accessible only to institutional investors or individuals meeting stringent “accredited investor” requirements.

By opening 401(k)s to such alternatives, the executive order aims to level the playing field, allowing everyday Americans to diversify their retirement savings with assets that may offer different risk and return profiles than traditional securities. This could potentially reduce portfolio volatility, smooth returns over time, and provide exposure to sectors that are less correlated with the stock market.

Potential for Higher Returns

One of the main appeals of private market investments is their potential for higher returns compared to conventional stocks and bonds. Studies have shown that private equity and real estate, in particular, can generate attractive risk-adjusted returns over longer time horizons.

Financial experts argue that even a modest allocation—around 5 to 10% of a retirement portfolio—dedicated to private markets can improve overall diversification and enhance returns. When integrated thoughtfully into professionally managed vehicles such as target-date funds, these alternatives may complement traditional holdings and better position savers for long-term growth.

The Benefits of Passive Mortgage Investing

One alternative asset class that fits well within the expanding 401(k) landscape is passive mortgage investing. Unlike direct real estate ownership, passive mortgage investments allow individuals to earn steady, predictable income backed by real property without the hassles of property management.

These investments typically offer attractive fixed income returns tied to mortgage interest, with the added security of being secured by real estate collateral. For retirement investors seeking diversification beyond stocks and bonds, passive mortgage investing can provide a reliable stream of monthly income, lower volatility than equities, and downside protection through conservative loan-to-value ratios.

As 401(k) options broaden, including access to such mortgage-backed investments could become an increasingly valuable component of a well-rounded retirement portfolio.

Risk and Complexity

Despite their potential, alternative investments come with significant caveats:

-Illiquidity: Private assets often require multi-year commitments and cannot be easily sold, which contrasts with the daily liquidity of stocks and bonds.

-Volatility and valuation: Digital assets like cryptocurrencies are notoriously volatile. Meanwhile, private investments may lack transparent, frequent pricing, making it difficult to know their exact value at any time.

-Higher fees: Management fees for private funds tend to be higher, potentially eroding returns if not carefully monitored.

-Suitability concerns: These complexities raise questions about whether all 401(k) investors—especially those nearing retirement—should have access to such risky, complex products.

As a result, critics caution that the expanded access must be accompanied by strong investor education, fiduciary oversight, and product safeguards to protect savers.

What’s Next: Timeline & Implementation

The executive order sets the policy direction, but the path to actual availability of these investments in 401(k) plans will take time:

-Regulatory Rulemaking: The Labor Department and SEC will engage in formal rulemaking processes, issuing guidance or regulations that could take several months or more, likely extending into 2026.

-Product Development: Asset managers such as Fidelity, Vanguard, BlackRock, State Street, Apollo, Blue Owl, and KKR are already developing 401(k)-compliant private funds and crypto strategies designed to meet regulatory requirements and fiduciary standards.

-Plan Sponsor Adoption: Employers and retirement plan providers must update plan documents, conduct due diligence, and evaluate the fiduciary risks involved before offering alternatives in their 401(k) lineups.

What Should Investors Do?

As these changes unfold, investors can take several proactive steps:

-Stay informed about updates from your plan sponsor or brokerage firm. Changes may be gradual and require patience.

-Research fund details carefully if alternatives become available. Pay close attention to fees, lock-up periods, liquidity constraints, and whether investments are offered through professionally managed funds rather than direct, stand-alone options.

-Assess your own risk tolerance honestly. Alternative assets can be valuable tools but typically suit investors with longer time horizons and a willingness to accept complexity and illiquidity.

Explore brokerage alternatives in the meantime. Some retirement accounts offer self-directed brokerage windows or Roth IRAs that allow access to private equity and crypto, providing a potential bridge before 401(k) inclusion.

Bottom Line

President Trump’s executive order signals a major shift in retirement investing, potentially democratizing access to asset classes previously out of reach for most Americans. While the opportunity to enrich 401(k) portfolios is real, it depends on regulatory clarity, robust investor education, and innovative product offerings that balance growth potential with investor protection.

The evolution of retirement savings is underway—but it is not yet complete. Savvy investors should monitor developments closely and prepare to adapt their strategies as new options become available.

In the meantime, review your retirement plan options, consider speaking with a financial advisor, and explore ways to diversify your portfolio within your current account framework.

Your retirement future could soon open to a whole new world of possibilities—and Myers Investment Group will keep you informed every step of the way.