The U.S. Retirement Fund Market Welcomes Major Changes

Recently, a significant policy change is expected to have a profound impact on the $12.5 trillion retirement fund market in the United States. This new policy aims to allow alternative assets such as private equity, real estate, and cryptocurrencies to enter 401(k) retirement accounts, marking not only a major adjustment in the rules of the U.S. capital markets but also reflecting a deep transformation trend in the financial industry.

401(k) plan to open alternative asset investment

According to reports, a new executive order will authorize the Department of Labor to reassess the guidelines for alternative asset investments in retirement plans under the Employee Retirement Income Security Act of 1974. The department will also be responsible for clarifying the government's fiduciary responsibility stance in providing asset allocation funds that include alternative assets.

What is more noteworthy is that this reform will establish a cross-departmental collaboration mechanism. The executive order requires the Department of Labor to work in coordination with the Department of the Treasury, the U.S. Securities and Exchange Commission (SEC), and other agencies to assess whether existing rules need to be modified to advance this policy, and specifically directs the SEC to provide access to alternative assets for participant-directed retirement plans.

This multi-institutional collaborative model is clearly aimed at breaking through existing regulatory barriers to pave the way for alternative assets to enter the retirement market on a large scale.

401(k) Plan Overview

401(k) plan is a retirement savings plan in the United States offered by employers, allowing employees to choose to save a portion of their wages into individual accounts for retirement savings. Employers typically also provide a certain percentage of matching contributions. These funds can be invested in relatively low-risk assets such as funds and stocks.

In 2025, the maximum employee contribution will be $23,500 per year, with an additional $7,500 for those aged 50 and above, and a maximum contribution of $11,250 for individuals aged 60-63. Employer matching contributions vary by plan. The total contribution limit for employees and employers is $70,000. Early withdrawals may face a 10% penalty, and withdrawals after retirement are taxed as ordinary income.

401(k) Plan Scale and Potential Impact

The 401(k) plan is the largest employer-sponsored retirement savings plan in the United States. As of March 31, 2025, the total retirement assets in the U.S. amounted to $43.4 trillion, of which the 401(k) plan holds $8.7 trillion in funds. In the 401(k) plan, the total assets managed by mutual funds amount to $5.3 trillion, accounting for 61% of the total.

The specific implementation details of the new policy have not yet been announced, but if 1% of the 401(k) funds are allowed to flow into the crypto market, it will bring in $87 billion. This could equate to a demand for 748,000 bitcoins or 22.6 million ethers.

Policy Background Analysis

This initiative is a continuation and upgrade of previous similar policies. There was a policy that allowed retirement plans to include private equity, but it was later revoked. Now, it has been rebooted and expanded in scope, attempting to break through existing barriers through executive orders and multi-department collaboration.

This policy is not only an economic decision but may also be aimed at garnering support from Wall Street. Private equity and hedge funds have always been significant sources of political donations, and easing the investment restrictions on 401(k) means that these institutions will receive a long-term stable influx of capital. Moreover, the recent frequent expressions of support for cryptocurrencies, including the proposal to establish a Bitcoin strategic reserve and concepts such as digital asset inventories, directly respond to the core demands of the crypto community.

Opportunities and challenges coexist

Supporters believe this is a process of "democratization" in the capital market, allowing the working class to share in the dividends of economic growth, while also injecting long-term stable funding into the alternative asset industry, and providing mainstream opportunities for emerging assets such as cryptocurrencies.

However, for the working class, this is both an opportunity to "break down investment barriers" and a challenge of "risk spillover." The essence of retirement accounts is to preserve and increase value, which contradicts the high-risk nature of alternative assets. Most of the working class lacks professional financial knowledge, making it difficult to accurately assess asset risks, potentially leading to an overreliance on "packaged products" recommended by employers or financial institutions. Institutions, driven by profit motives, may tend to exaggerate returns and downplay risks, causing the working class to passively bear excessive risks in an environment of information asymmetry.

New Trends in Cryptocurrency Policy

Recently, the U.S. government has been intensively releasing a series of signals favorable to the development of cryptocurrencies, including the establishment of a White House AI and cryptocurrency director, listing cryptocurrencies as a national priority, proposing the establishment of a Bitcoin strategic reserve, hosting "Cryptocurrency Week," and signing stablecoin legislation, forming a comprehensive policy package.

It is worth noting that several states in the United States have previously proposed cryptocurrency reserve bill drafts, planning to authorize a portion of retirement funds, retirement systems, or public funds that include retirement funds to be invested in Bitcoin. Most states limit this investment ratio to 10%, but most bills have been rejected or are stalled due to recess.

A recent report released by the White House discusses the state-level cryptocurrency regulatory situation. Some states have applied state money transmission laws to digital asset custodians and trading platforms, requiring intermediaries to register as money transmission entities. Some states have excluded digital asset trading from money transmission laws, while others have established specific regulatory frameworks for digital assets. The report notes that in the division of regulatory responsibilities, federal law should take precedence over state law to unify the applicability of securities and commodities-related regulations.

Conclusion

As the investment scope of the 401(k) account expands, financial literacy will become a key factor determining the success or failure of investments. Whether an effective firewall can be established in the regulatory system to prevent the transfer of interests and systemic risks will be an important test of the governance capacity of the U.S. capital markets. In the face of this massive market worth $12.5 trillion, all participants are closely watching the final direction of this capital game.