Market volatility has a way of testing even the most well-structured retirement plans. When equities swing and bonds fall short, what once felt like a balanced portfolio can suddenly look vulnerable. High-income earners who’ve followed the traditional playbook of maximizing 401(k) contributions and holding a mix of stocks and bonds are starting to ask a tough but necessary question: Is conventional diversification still enough to meet long-term goals?
Thanks to recent policy changes, certain private investments can now be included in qualified retirement plans. For high-income earners, this opens the door to a broader set of options, some with the potential to reduce portfolio volatility and improve long-term outcomes.
That said, this isn’t a plug-and-play solution. Integrating alternatives into a retirement strategy takes careful planning, the right structure, and an advisor who understands both the risks and the opportunities.
What You’ll Learn
Traditional retirement strategies may no longer be enough. High-income earners are questioning whether the classic mix of stocks and bonds still provides adequate protection and growth in today’s volatile markets.
New policies are expanding access to private investments. Recent changes allow certain private assets like private equity and real estate to be included in qualified retirement plans, offering potential for improved diversification and long-term returns.
Private investments come with trade-offs. While they can enhance performance, they often involve higher fees, reduced liquidity, and longer lock-up periods, factors that require careful consideration.
Not all accounts offer the same flexibility. IRAs, self-directed accounts, and Solo 401(k)s may provide more access to private investment options than traditional workplace plans.
Fit matters more than flash. Alternatives can be a powerful tool when aligned with your financial goals, timeline, and risk tolerance, but they’re not a one-size-fits-all solution.
Rethinking the Retirement Formula
Most retirement plans today still lean heavily on the same core ingredients: tax-advantaged accounts, a blend of stocks and bonds, and a long-term, stay-the-course mindset. It’s a framework that’s worked well in the past, but it wasn’t built for today’s realities.
Traditional plans assumed a level of stability that no longer exists. Employer pensions are rare, markets are more volatile, and retirement can now last three decades or more. In this environment, even high earners are discovering that conventional strategies may no longer be enough to reach their financial goals or protect against the risks ahead. [1]
The numbers tell the story: the median Gen X household, now in its peak earning years, holds just $40,000 in retirement savings, while the average sits around $243,000. Even those with strong incomes are realizing that traditional strategies aren’t generating the returns they once did. Half of U.S. households are projected to fall short of maintaining their current standard of living in retirement, even if they work until age 65. [1]
It’s no wonder investors are rethinking what “retirement ready” really means and exploring new, carefully managed alternatives that may help fill the gap. That gap between expectation and reality has set the stage for a major shift in how retirement investing works.
How Private Investments Are Expanding Retirement Plan Options
Until recently, private market investments, including private equity, private credit, infrastructure, and real estate, were reserved almost exclusively for institutional and ultra-high-net-worth investors. But that’s changing. A new executive order has set the stage for retirement plans to incorporate a broader mix of private investments, bringing a long-standing pension-style strategy within reach for individual investors. For decades, large pension funds and university endowments have relied on alternatives to reduce volatility and improve long-term returns, on average outperforming traditional 401(k) plans by about 0.5% per year. [2]
Major players among financial institutions are already stepping in, partnering with asset managers to offer retirement plan participants access to private market strategies. BlackRock estimates that adding private assets could increase 401(k) balances by up to 15% over 40 years. Historically, private equity has delivered roughly 14% annualized returns over the past two decades, compared with just over 8% for the global public equity index. [3, 4]
For investors seeking more stability and diversification in uncertain markets, these developments represent a pivotal shift—a chance to modernize retirement portfolios with tools that were once off-limits to everyday investors. That said, this isn’t without complexity or risk.
How to Evaluate Alternative Investments in Your Retirement Plan
It’s easy to get caught up in the buzz around alternative investments, but a thoughtful approach is essential. Not every opportunity is right for every investor, and knowing what’s available (and appropriate) for your situation is key.
While certain private investments can stabilize performance over time, others may introduce more risk, higher fees, or limited access to your funds. Transparency and liquidity are key concerns. Unlike publicly traded companies, private firms don’t have the same reporting requirements, and many private investments come with multi-year “lock-up” periods during which your money isn’t easily accessible. That can be a problem if you need flexibility, especially as you approach retirement.
If your 401(k) plan has limited options, your IRA might offer more flexibility. Investors with a Schwab Personal Choice Retirement Account (PCRA) or a self-directed IRA can often access a broader range of private opportunities. Solo business owners and 1099 professionals in commercial real estate may also consider a Solo 401(k), which allows for a wider investment menu, including private funds.
The bottom line: alternatives can be a smart addition to a well-designed retirement plan, but only if they fit your goals, timeline, and risk tolerance. If you’re curious, let’s discuss whether alternative investments are a good fit for your goals. We’ll help you explore options designed to strengthen your portfolio, preserve flexibility, and keep your long-term plan on track.
Sources:
- https://www.forbes.com/sites/dandoonan/2024/04/11/americans-are-worried-about-retirement-savings-and-they-should-be/
- https://thehill.com/business/personal-finance/5425719-access-to-401ks-couldnt-come-at-a-better-time-for-private-equity/
- https://www.napa-net.org/news/2025/5/empower-to-offer-private-investments-in-401ks-ceo-ed-murphy-explains-why/
- https://www.plansponsor.com/missionsquare-income-america-debut-in-plan-retirement-income-solution/
Sean Gerlin, CFP®, CPWA®, ChFC®, CLU®, is the Founder and Principal of Envision Wealth Planners, a fee-only financial advisory firm based in the greater Orlando area. Sean specializes in helping high-income families, business owners, and commercial real estate executives align their wealth with their values through a comprehensive Financial Life Planning approach. Learn more about them at envisionplanners.com.
This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.