Private equity, credit, infrastructure, real assets, and other private investments have long been inaccessible for most average investors. In fact, for decades, these alternatives have been largely reserved for institutions and ultra-high-net-worth investors.
But in August 2025, an executive order opened the door for private investments to become more easily incorporated into 401(k) plans, essentially broadening access for millions of individual investors.
For high-income earners who may be interested in diversifying a portion of their portfolio away from traditional investments, this shift in what regulators allow inside retirement plans is significant. While private investments come with certain risks and general liquidity challenges, they do offer some notable advantages, including inflation resistance and higher potential returns.
What’s the Appeal of Including Alts in Your Retirement Plan?
Alternative, or private, investments have the potential to achieve returns beyond what’s possible with traditional stock market investments, as well as reduce market-induced portfolio volatility.
Private credit and infrastructure funds, for example, have the ability to generate steady cash flow even when public markets struggle. Other opportunities, like private equity and venture capital, can offer growth exposure to companies before they become publicly traded.
For high-net-worth investors who may be comfortable locking up some liquidity or pursuing higher-returning opportunities within their retirement portfolio, private investments can serve as a new source of diversification. In the same way that endowments and pension funds have long used alternatives to counter market volatility, individual investors can now apply similar strategies to strengthen their own retirement portfolios.
The Current State of Private Investments in 401(k)s
In August 2025, President Trump signed an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors,” which directed the Department of Labor to expand fiduciary guidance so plan sponsors could incorporate private investments into defined-contribution plans, including 401(k)s. [1]
Prior to August, private equity already appeared in a small fraction, around 2.2%, of 401(k)s. The new rules, however, aim to make these options more mainstream. The policy appears to recognize that as more companies remain private for longer, public-only investors risk missing significant growth opportunities. [2]
Tips for Incorporating Private Investments into Your 401(k)
If you’re considering taking advantage of recent regulatory changes, remember—not all private investments are created equal. While new regulations have made certain investment opportunities more accessible, you’ll still need to understand how these assets work within a retirement framework.
Tip #1: Understand Structure and Liquidity
Unlike traditional stocks or funds that can be traded daily, private investments follow a different timeline for capital commitments and distributions. Many private funds are “closed-end,” meaning investor capital is locked up for several years while the fund’s managers deploy it across various opportunities, such as middle-market buyouts, commercial real estate, or infrastructure projects, to name a few. While certain private investment opportunities can help capture value over longer cycles, they also tend to limit flexibility. If you need liquidity sooner than expected, you may have to tap into other assets first.
As you near age 59.5, liquidity concerns may become more top of mind. That said, “evergreen” or semi-liquid funds offer investors more predictable redemption windows (such as quarterly or semi-annually), making them a potentially more appealing option for those with 401(k)s who are quickly approaching retirement. [3]
Tip #2: Evaluate Transparency, Fees, and Fiduciary Oversight
Transparency has long been a sticking point for private markets, but we’re likely to see some improvement as more plan providers incorporate alternatives into their retirement plan offerings. According to the 2025 executive order, fiduciary standards for private investments in retirement plans are being refined to ensure that fund sponsors provide appropriate disclosures and risk documentation. Still, the level of transparency can vary quite a bit from one offering to the next.
As with any type of investment, be sure to understand the risks, fees, performance history, anticipated timeline, and other important factors before committing your capital. It’s not unusual for private investment opportunities to come with higher fees than publicly traded investments—though as we mentioned, the potential returns may be higher as well.
Tip #3: Diversification Is Still Fundamental
Just as diversification matters in traditional markets, it’s equally essential in the private space. Concentrating your entire alternative allocation to a single fund or asset class increases your single-investment risk. And, just like in traditional stocks and bonds, you may miss out on the stabilizing effects that other categories provide.
Tip #4: Integrate Alternatives Within Your Broader Retirement Plan
It might sound simple enough, but don’t forget to view your private investments as one component of your broader financial plan. Because these assets can have unique tax characteristics, long holding periods, and complex reporting requirements, consider them in the context of your broader investment objectives, whether that’s long-term growth, income stability, or inflation protection.
A knowledgeable financial advisor can help determine the optimal allocation for private investments within your retirement plan. The ratio, often between 10% and 20% of the overall portfolio, will need to depend on your risk tolerance and time horizon. You and your advisor can also discuss how these investments will work in tandem with your other accounts, such as your taxable investment portfolios, to ensure that diversification, liquidity, and tax efficiency remain intact across your entire financial picture.
No 401(k)?
If you don’t have access to an employer 401(k) or your plan options are limited, a self-directed IRA can offer significantly more flexibility. Unlike traditional IRAs limited to mutual funds and ETFs, self-directed IRAs enable investors to hold a broad range of alternative assets, including private equity, real estate, private credit, venture funds, and even direct business interests.
Or, if you’re a solo business owner or 1099 commercial real estate executive, you may be eligible to open a solo 401(k). With much higher annual limits than IRAs, solo 401(k)s can hold nearly any asset type permitted by the IRS, including private investments. You can also incorporate a Roth component into your solo 401(k) if you’d like to allocate some after-tax contributions to investments with high long-term growth potential.
Interested in Incorporating Private Investments into Your Retirement Planning?
With recent policy changes and growing institutional adoption, private investment opportunities are continuing to reshape how high-income earners build long-term wealth, particularly for retirement. Before making changes to your own retirement accounts, check in with your plan provider, find out what’s possible, and talk to a financial advisor about your options.
Sources:
- https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/
- https://www.plansponsor.com/ahead-of-executive-order-what-to-know-about-private-equity-in-401k-plans/
- https://www.crystalfunds.com/insights/alternative-investments-for-retirement
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.