IRS increases 401(k) contribution limits for 2026
The IRS will increase 401(k) and catch-up contribution limits for 2026, allowing workers to save up to $32,500 for retirement.
The Trump administration wants American retirement savers to access “alternative” investments such as private equity and cryptocurrencies. These developments have heightened debate about whether potentially risky assets belong in retirement accounts.
On March 31, the Department of Labor released a proposed rule that would ease legislative and regulatory barriers to adding alternative investments to retirement plans. The rule is based on President Donald Trump’s 2025 Executive Order.
The introduction of private equity into 401(k) accounts is a controversial initiative of the Trump administration. Companies that invest in private assets are lobbying for access to lucrative workplace retirement plans. Critics warn that personal finance is risky, complex and opaque. Recently, there has been growing concern about the fundamental health of the private credit industry.
“Anyone who cares about the economic security of working people should oppose this proposed rule,” Sen. Elizabeth Warren (D-Mass.) said in a March 30 statement.
Industry leaders praised the administration’s efforts.
“Private investments have provided strong, stable returns and diversification for public pension funds for decades, and everyday savers should be able to reap the benefits, too,” said Will Dunham, CEO of the American Investment Council, a private equity trade group.
401(k) retirement savers are gaining access to private equity
Historically, the world of private investment has been dominated by wealthy investors, endowments, and pension funds.
That is changing. Last summer, BlackRock announced it would offer a 401(k) target-date retirement fund that includes private investments. Another retirement giant, Empower, made a similar move. Other 401(k) providers are also exploring the idea.
In an August 2025 executive order, President Trump significantly boosted private equity and other “alternative” investments in retirement plans.
The order stated that “it is the policy of the United States to ensure that all Americans preparing for retirement have access to funds, including investments in alternative assets,” provided that the investments will increase investment returns during retirement.
What is private equity? What are “alternative” investments?
The executive order targets several categories of alternative investments. Basically, it’s something other than the traditional stocks and bonds that are the bread and butter of traditional investments. Alternative investments include private equity, real estate, cryptocurrencies, direct investments in private companies, and more.
Private equity firms raise money to buy, manage, and sell companies for a profit. Investors are typically wealthy individuals or institutions. Private credit markets lend money to companies and individuals outside the banking and bond industries.
Until now, that world has been largely inaccessible to everyday retirement savers. According to Investopedia, the minimum investment amount in a private equity fund can be in the millions of dollars, or at least hundreds of thousands of dollars. Your money may be tied up for years.
However, retirees have long had access to private investments through pension plans that have a history of investing in private markets.
What are the advantages and disadvantages of private investment?
Private equity is attractive to wealthy investors and pension fund managers because of its potential to outperform the stock market.
According to Investopedia, private equity’s average annual return from 2000 to 2020 was 10.5%, outperforming the S&P 500. Private equity is considered a high-risk, high-return alternative to stocks.
Private investment has a big downside. Private companies have fewer regulations and reporting requirements than public companies. It can be difficult to estimate how much profit private companies make.
“These are private companies, which makes them less transparent,” Motley Fool senior adviser Robert Brokamp told USA TODAY in 2025.
Stocks come with risks. Private equity can be risky
Stocks come with risks, but retirement savers who put their money in S&P 500 index funds are “investing in fairly well-established companies,” Brokamp said.
In contrast, private equity often involves companies in distress. The number of bankruptcies is increasing further.
“Private equity is riskier than public equity,” Investopedia Editor-in-Chief Caleb Silver told USA TODAY in 2025. “It’s more speculative in nature because you’re investing in companies that sometimes don’t have a track record.”
Given the risks, Silver suggests that everyday retirement savers should invest “no more than 10% of their portfolio” in private investments. “It’s simply too risky.”
Is there room for private investment in a 401(k)?
Some prominent voices are questioning the wisdom of opening up the 401(k) industry to private investment.
In 2025, Massachusetts Sen. Warren wrote a letter to Empower’s CEO about a plan to propose private investments in 401(k)s.
“Given the industry’s weak investor protections, lack of transparency, high management fees, and unsubstantiated claims of high returns, we are seeking information on how your organization can ensure the safety of billions of dollars in retirement savings as you implement this program,” Warren wrote.
Empower’s response was essentially that retirement savers deserve access to a lucrative private investment market from which they have been excluded for decades.
Some economists have also raised similar questions. Alicia Munnell, a senior adviser at Boston University’s Center for Retirement Research, criticized President Trump’s executive order in a 2025 essay.
“As far as I can see, the private equity industry is the only one pushing private equity in 401(k) plans,” Munnell wrote. He added: “My view is that people should invest in things they understand, and private equity is not a transparent investment.”
Contributed by: Reuters. This story has been updated with new information.
