You shouldn’t have to be a master investor in your spare time to afford a decent retirement. Policymakers have understood this for decades; that’s why the Employee Retirement Income Security Act of 1974 (ERISA) established minimum standards for private-sector retirement plans, requiring employers to clearly communicate plan information and subjecting them to a fiduciary duty, so advisers operate exclusively in the best interest of their beneficiaries.

ERISA recognizes the “enormous asymmetry of power in these markets,” Corey Frayer, director of investor protection at the Consumer Federation of America, told the Prospect. “There is a strict set of laws about employer-sponsored plans in the fiduciary responsibilities related to those plans, and there is government oversight and enforcement on top of that.” As a result, most 401(k) retirement plans feature a default “plain vanilla” option, with a mix of publicly traded stocks and bonds.

But not everyone is happy with this approach, particularly the financiers in the private equity and cryptocurrency industries who want to get their hands on the over $12 trillion stuffed into worker retirement funds. And they may finally have their opportunity with the Trump administration, the culmination of years of pressure.

As the country was distracted by the COVID-19 pandemic in June 2020, the Department of Labor (DOL) released an information letter affirming that plan sponsors could include private equity in certain investment options, so long as they comply with ERISA. It was a direct response to an inquiry from Pantheon Ventures and Partners Group, two of the many private equity firms vying to crack open the defined contribution retirement market.

DOL guidance is non-binding, but it serves as a framework for regulatory expectations and fiduciary conduct. As a result, such guidance has enormous influence on industry practices. Corporate raiders and crypto bros alike are well aware of this.

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More than a dozen consumer advocacy groups—including the Consumer Federation of America—responded to the DOL’s information letter, demanding the agency to withdraw its guidance, expressing “grave concerns” over excessive fees, illiquidity, and the broad dispersion of returns among private equity funds, among other issues. At the time, they wrote that “industry trends suggest that any out-performance private equity has enjoyed in the past is likely to narrow dramatically or disappear entirely in coming years,” and it turns out they were right.

Joe Biden spoke out against the potential for private equity involvement in 401(k) plans on the campaign trail in 2020. While in office, he never quite withdrew the guidance, but his Labor Department added several “cautionary notes” that raised concern from plan sponsors about liability risk. This largely deterred plan sponsors from offering private equity as an investment option.

Then Trump returned to office, and amid more lobbying pressure, expectations grew that his administration would roll out new guidance to quell plan sponsors’ concerns and heed the calls of the private equity industry by declaring open season on the defined contribution retirement market. There was added desperation from the industry because of their dire need for cash amid weakening performance and fewer deals. Some firms have begun mortgaging their own funds for money to pay out limited partners. Retail investors represented trillions in untapped potential.

Just months into his second term, the Financial Times reported that Trump is considering an executive order that would direct federal agencies like the DOL to consider the merits of expanding private equity’s access to 401(k) plans specifically. Such an expansion would effectively give plan sponsors more cover by softening regulatory guidance and strengthening legal protections to insulate them from liability risk.

In anticipation of these changes, some retirement plan providers have already unveiled plans to offer private equity investments to 401(k) beneficiaries specifically. Empower, one such provider, will introduce private equity as an investment option through its managed account platform later this year, according to The Wall Street Journal. Partners Group, Apollo Global Management, Sixth Street, and a handful of other private equity firms will join Empower in offering these investments to employees enrolled in defined contribution plans.

Although ERISA plan providers have been much less driven to move alternative investments into private-sector pension plans, Frayer explained that retirement plan providers will feel pressure to create volume, potentially intensifying competition among private equity firms to “get their products placed in those plans.” He added: “What happens when your pension is invested in private equity that is buying out your company and leveraging out your pension to make more investments to sell to your pension? The ouroboros of private equity danger to investors here is terrifying.”

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Digital asset firms, which invested heavily in elections in 2024, didn’t want to be left behind in the dash for retirement cash, and their pressure also bore fruit. In late May, the DOL repealed Biden-era guidance dissuading fiduciaries from including crypto investments in employer-sponsored benefit plans. The previous guidance warned plan sponsors that offering such investments, which are incredibly volatile and susceptible to market speculation, could be met with regulatory scrutiny. By eliminating this guidance, the DOL signaled its adoption of a not-so-neutral—and perhaps friendly—approach to crypto, and the Trump administration’s obsession with digital assets will likely provide a tailwind for the agency.

ADDING HIGH-RISK ASSET CLASSES to retirement plan options will do nothing to resolve the real problem facing retirees: the current system is a shambles not fit for purpose. Except for the wealthiest, most Americans do not have enough money to retire on by the time they reach the end of their working lives, as labor economist and retirement security expert Teresa Ghilarducci testified before the Senate last year. Forty-four percent of households with people ages 55 to 64 have no savings at all, said Ghilarducci, who is also a professor of economics and policy analysis and chair of economics at The New School.

In an interview with the Prospect, Ghilarducci said that adding private equity and digital assets to retirement plans will do nothing to correct the incoming retirement crisis, and will likely make it worse.

“Both of these moves expose individual investors, the American worker, to more financial risk for the benefit of the crypto firms and the private equity firms,” she said, adding that the decision comes on top of Trump’s other decisions that make retirement saving more difficult, including his market-scrambling tariffs, his punishing spending bill, and his threats to Social Security, which her research found “is the only source of significant retirement wealth for most households.”

She said that while private equity may have a place in professionally managed retirement accounts, such as a union- or state-run defined-benefit pension plan, individual investors don’t have the same level of skill to make sound decisions about that asset class.

“It is asking too much of the individual, as has been the interpretation of standing law. This is a radical, radical proposal. It goes against tradition, it goes against common sense,” Ghilarducci said. “Private equity, hedge funds, bank credit—there’s a whole host of asset classes that are not available to retail investors in trusts, and the reason is simple. These are very sophisticated products and no individual investor should be expected to reasonably understand their risks and fees.”

Even institutional investors may be making too much out of the potential gains from private equity investments. A basic total market index fund has performed better than private equity over the short- and long-term for the last decade, according to new research from the Financial Times.

Ghilarducci pointed to the bipartisan Retirement Savings for Americans Act of 2023 as a better way to approach the country’s failing retirement system. Rather than expand the investment menu for people who already have a retirement fund, the act would address those who don’t have one to begin with. Full- and part-time workers who don’t have an employer-sponsored retirement plan would be automatically enrolled in an account set to save 3 percent of their income. Gig workers and independent workers would also be eligible. Investment options would be low-cost, there would be a 5 percent matching contribution, and the fund would belong to the worker, who could take it with them if they changed jobs.

The sponsors of the bills—Sens. John Hickenlooper (D-CO) and Thom Tillis (R-NC) and Reps. Lloyd Smucker (R-PA) and Terri Sewell (D-AL), said in a fact sheet that initial estimates suggest that someone earning $30,000 a year could retire with about $600,000 over 40 years of savings. 

Such legislation would be more meaningful to Americans’ retirement prospects because it would address the people who have no savings, said John Lettieri, a cofounder of the Economic Innovation Group.

Lettieri didn’t think there was any need to reimagine the retirement system from scratch, and downplayed changes that didn’t invite more people in to save. “Anything that hasn’t yet tackled the central issue is going to be insufficient. We know that whatever improvements have been made, Congress has not tackled the big problem of lack of market access,” he said in an interview, adding that the longer lawmakers wait to do so, the worse the problem will become.

“We’re asking people with the least wherewithal to quote ‘just figure this out,’ to manage a set of complex decisions about their financial security without the tools higher-income people take for granted,” Lettieri added.  

Failing to address America’s retirement crisis with real solutions will cause generational consequences, Ghilarducci said. Ultimately, it will mean immiseration for older people, including forcing more onto the street.

“Homeless, isolated, abandoned to the loneliness crisis,” Ghilarducci told the Prospect. “But it also trickles down because before you’re homeless, you go to your family, you go to your daughter who has three kids to raise.”

Ultimately, it will mean immiseration for older people.

THE DEREGULATORY FEEDBACK LOOP between public and private markets “has been a race to the bottom and a long project of undermining the securities laws going back to the Reagan administration,” Frayer told the Prospect. With scant disclosure requirements, relatively nominal compliance costs, and the allure of attractive returns, private markets experienced significant growth (regardless of its relatively weak returns) throughout the better half of the past quarter century, igniting efforts to make public markets more competitive by way of deregulation.

According to Frayer, digital assets are becoming the third step in that scheme. “This is a philosophy of financial regulation, and it runs from our public markets all the way down into crypto,” he said. “You will not find a single crypto market argument for deregulation that the traditional financial services space has not already made.”

As federal agencies like the Consumer Financial Protection Bureau and Securities and Exchange Commission bear the brunt of the Trump administration’s deregulatory agenda, the very guardrails erected in the wake of financial catastrophes like the Great Depression and Great Financial Crisis could be upended. In any case, the GENIUS Act, which would sanction stablecoins and allow Big Tech firms to issue their own cryptocurrencies, appears crafted to provide an implicit bailout to these issuers if they become insolvent. Given that retirement plan providers could add stablecoins to the investment menus of private-sector pension plans, the potential for a chunk of ordinary investors’ retirement savings to be reduced to mere exit liquidity is not implausible.

Whether it's private equity or crypto, the scheme to include risky securities in personal retirement portfolios is much less about democratizing access to a wider set of financial instruments than it is about extracting wealth from working-class people.