Retirement Savers Are Skeptical About Alternative Assets in 401(k)s—Even as the White House Shows Support

Nearly half of all retirement savers said in a recent survey that they’re opposed to putting alternative investments into their retirement accounts.

The survey, conducted by retirement planning company Boldin, found that only 34% of respondents support the idea of including alternative assets like cryptocurrencies, private equity, or real estate in their 401(k)s or other retirement-savings vehicles. The remaining retirement savers said they were neutral about these types of investments or opposed to them.

This outlook follows the executive order President Donald Trump signed on Aug. 7 to make it easier for employer-sponsored retirement plans to include these assets.  

What’s Changing

There was never a law prohibiting plan sponsors from offering these types of investments to employees. However, the order directs the Department of Labor and the Securities and Exchange Commission to provide employers with guidance about how to do so. 

Still, Boldin’s survey indicates that investors may not jump at the chance.

When asked directly if they will opt into these investment options, 80% of respondents said they are “not likely” to do so. Less than 10% said they would be “highly likely” to do so.

“These findings show that even when new options are available, experienced planners recognize the risks and are cautious about putting their retirement security on the line,” said Steve Chen, founder and CEO of Boldin.

Indeed, alternative assets can be risky, expensive, less liquid, and less transparent. Financial experts previously told Investopedia that while these assets have the potential to be lucrative and can diversify a portfolio, traditional investments are a better bet for most investors. 

More Fees

Many people simply aren’t convinced that financial institutions have their best interests at heart. Nearly 70% of those surveyed by Boldin said they think that private equity firms and crypto companies will benefit the most from these new policies, rather than retirement savers. Opening up 401(k)s to alternative assets will almost certainly mean extra fees and profits for the companies, regardless of how investors fare.

For savers who are interested in alternative assets, financial advisors strongly recommend using a professional who is well-versed in the complexities and who will be transparent about what’s best for an individual’s portfolio.

“The key for both clients and advisors is education,” said certified retirement planner Patrick Huey. “[They must understand] that while the menu may expand, not every new dish should be piled high on the retirement plate.”