Trump, Alternatives, and the Solo 401(k): The Retirement Plan That Paved the Way for Alts in 401(k)s

For decades, the American retirement system has rested on a simple but increasingly outdated assumption: that 401(k) investors should primarily own stocks, bonds, and mutual funds, while private investments belong to institutions and wealthy individuals. That assumption is now being challenged in a meaningful way.

A combination of policy shifts, market realities, and evolving views on retirement security are pushing alternatives such as private equity, real estate, private credit, and even digital assets closer to the mainstream of workplace retirement plans. At the center of this shift is a 2025 Executive Order from President Trump, paired with a newly proposed Department of Labor (DOL) fiduciary rule aimed at clarifying how alternatives can be prudently included in 401(k) plans.

At the same time, this debate is not entirely new. Alternatives have been legally permitted in retirement plans since ERISA was enacted in 1974. In fact, Solo 401(k) plans, which are also ERISA plans, have been successfully investing in alternatives for nearly five decades. The real question is not whether alts can be in 401(k)s, but why they have been effectively excluded from most employer-sponsored plans — and whether that exclusion still makes sense today.

The Trump Executive Order: A Catalyst for Change

In 2025, President Trump issued an Executive Order directing the Department of Labor and the Securities and Exchange Commission to clarify how retirement plans could responsibly include private market investments. The core idea was straightforward: if institutional investors and high-net-worth individuals routinely use alternatives to enhance diversification and returns, then everyday retirement savers should not be locked out of those same opportunities.

The EO did not mandate that 401(k) plans must include alternatives. Instead, it instructed regulators to remove unnecessary barriers and provide clearer guidance so plan fiduciaries could offer alternatives without undue fear of litigation or regulatory scrutiny.

This was an important shift in tone. For years, the DOL had signaled skepticism — if not outright hostility — toward private assets in 401(k) plans, particularly in default options like target-date funds. While ERISA never prohibited alternatives, prior guidance created a chilling effect that discouraged plan sponsors from even considering them.

The Trump EO reframed the conversation. Rather than asking whether alternatives were too risky for workers, policymakers began asking whether it was fair or even responsible to deny workers access to the same asset classes that drive long-term growth for pensions, endowments, and sovereign wealth funds.

The DOL’s Proposed Fiduciary Rule on Alternatives

In response to the Executive Order, the Department of Labor submitted a proposed rule titled “Fiduciary Duties in Selecting Investment Alternatives” to the Office of Management and Budget for review.

While the final details will emerge after public comment, the intent is clear: move away from an implicit “alts are risky — avoid them” stance toward a more principles-based fiduciary framework under ERISA.

The proposal aims to clarify that:

• Alternatives are not inherently imprudent simply because they are illiquid or complex.
• Fiduciaries can include private assets in 401(k) menus and even in target-date funds — as long as they follow a prudent process.
• Risk management, transparency, and reasonable fees should guide decision-making rather than blanket prohibitions.

If adopted, this could be a watershed moment for retirement investing in America. Even a small allocation of 401(k) assets to private markets would create one of the largest new pools of long-term capital in history, while potentially improving diversification and risk-adjusted returns for millions of workers.

Why Alternatives Have Traditionally Been Excluded from 401(k)s

Despite being legal for decades, alternatives have been largely absent from traditional employer-sponsored 401(k) plans. This exclusion was not driven by tax law, but by fiduciary risk and litigation concerns under ERISA.

Plan sponsors, typically employers, have a legal duty to act in the best interest of plan participants. If something goes wrong, they can be sued personally for breaches of fiduciary duty. This has made many employers extremely conservative in their investment menus.

Several factors contributed to their reluctance to offer alternatives:

1. Litigation Risk

Over the past decade, there has been a wave of class-action lawsuits against employers alleging that their 401(k) plans had excessive fees or underperforming funds. Even when employers win these cases, the legal costs and reputational damage can be significant.

Because alternatives often carry higher fees than index funds, employers feared that including them would invite lawsuits — even if those fees were justified by better performance or diversification benefits.

2. Liquidity Concerns

Traditional 401(k) plans are designed around daily liquidity — meaning participants can buy or sell their investments at any time. Many alternatives, such as private equity or real estate funds, do not offer daily redemptions.

Rather than figuring out how to structure liquidity properly, many employers simply avoided alternatives altogether.

3. Complexity and Transparency

Alternatives can be harder to explain, harder to value, and harder to benchmark than stocks and bonds. This made fiduciaries uncomfortable, even though complexity alone does not make an investment imprudent.

As a result, most workers were left with portfolios dominated by public markets — even though a well-diversified institutional portfolio typically includes meaningful exposure to private assets.

What Is a Solo 401(k) — and Why It Matters?

A Solo 401(k) is an employer-sponsored retirement plan for business owners with no full-time employees (other than a spouse). Like any 401(k), it is governed by ERISA and the Internal Revenue Code.

However, unlike traditional workplace plans, the business owner is both the employer and the participant — meaning there is no third-party fiduciary risk from other employees.

This structure has allowed Solo 401(k) investors to take full advantage of ERISA’s original intent: broad investment freedom, including alternatives.

Since 1974, Solo 401(k) plans have been legally permitted to invest in:

• Residential and commercial real estate
• Private businesses
• Venture capital and startups
• Private credit and hard-money lending
• Precious metals
• Cryptocurrency
• Oil and gas
• Syndications and private funds

Millions of entrepreneurs, physicians, attorneys, real estate investors, and professionals have used Solo 401(k)s to build diversified portfolios far beyond stocks and bonds.

In many ways, the Solo 401(k) has served as a real-world proof point that alternatives can work inside retirement accounts — safely, legally, and effectively.

Why Solo 401(k)s Embraced Alts — and Employer Plans Did Not

The contrast between Solo 401(k)s and employer-sponsored 401(k)s is striking.

Solo 401(k)s embraced alternatives because:

• There is no multi-participant fiduciary risk.
• The account owner controls investment decisions.
• There are fewer administrative constraints.
• Investors often have specialized knowledge (e.g., real estate or private equity).

Employer-sponsored 401(k)s avoided alternatives because:

• Employers feared being sued.
• Daily liquidity expectations made structuring private assets difficult.
• Plan administrators preferred standardized mutual funds.
• Regulatory guidance was unclear or discouraging.

In other words, it was not that alternatives were illegal or inappropriate — it was that the fiduciary framework created perverse incentives to stick with traditional assets, even if that meant worse diversification for workers.

Why Alternatives Should Be in 401(k)s

1. Better Diversification

Public markets tend to move together in times of crisis. Alternatives — particularly real estate and private credit — often behave differently, reducing overall portfolio volatility.

2. Potential for Higher Returns

Many institutional investors allocate 20–40% of their portfolios to alternatives precisely because they believe these assets can generate superior long-term returns.

Excluding them from 401(k)s means ordinary workers miss out on a major source of wealth creation.

3. Inflation Protection

Assets like real estate, commodities, and infrastructure can serve as hedges against inflation — something that has become increasingly important in recent years.

4. Alignment with the Real Economy

Alternatives often invest in tangible assets, small businesses, and infrastructure projects that directly contribute to economic growth — not just stock market speculation.

How IRA Financial Has Helped Tens of Thousands of Investors Use 401(k) Assets for Alternatives

For nearly two decades, IRA Financial has been at the forefront of helping investors use retirement funds — including Solo 401(k)s — to access alternative investments.

With over 27,000+ clients and $5+ billion in assets, IRA Financial has built a platform that allows investors to:

• Set up self-directed Solo 401(k)s
• Invest in real estate, private equity, crypto, and more
• Maintain full IRS compliance
• Handle annual reporting and tax filings
• Avoid prohibited transactions
• Structure deals properly within retirement accounts

Unlike traditional custodians that limit investors to stocks and mutual funds, IRA Financial has enabled true investment freedom within the boundaries of the tax code.

In many ways, IRA Financial’s experience proves that alternatives can thrive inside retirement accounts when done correctly.

Why IRA Financial Is Uniquely Positioned for This Moment

As the DOL moves toward a more open approach to alternatives in 401(k)s, IRA Financial stands out for several reasons:

• Deep expertise in ERISA and tax law — founded and led by Adam Bergman, a tax attorney with extensive experience in retirement planning.
• Proven track record with alternatives — long before they were fashionable.
• Flat-fee pricing model — avoiding asset-based fees that penalize growth.
• Comprehensive compliance support — reducing audit risk for investors.
• One-stop platform for retirement and alternatives — covering everything from real estate to crypto.

As employer-sponsored 401(k)s begin to embrace alternatives, IRA Financial’s leadership in the Solo 401(k) space provides a roadmap for how this transition can happen responsibly.

Final Thoughts

The debate over alternatives in 401(k)s is not really about whether they are legal — they always have been. It is about whether public policy will finally align with economic reality.

The Trump Executive Order and the DOL’s proposed fiduciary rule suggest that policymakers are ready to modernize retirement investing rather than cling to outdated assumptions.

Meanwhile, Solo 401(k) plans demonstrate that alternatives can coexist with ERISA protections and strong compliance — when structured properly.

As this shift unfolds, IRA Financial will continue to lead the way, helping investors harness the full power of their retirement savings — whether through Solo 401(k)s today or expanded workplace plans tomorrow.