For decades, retirement plans like 401(k)s have been built on two familiar building blocks: stocks for growth and bonds for stability and income. But that may soon change.

Recent policy shifts are opening the door for private equity, private credit, and other alternative investments to enter your retirement plan.

So, what does this mean for you?

Why This Is Happening

Earlier this year, an executive order directed regulators to ease restrictions on retirement plans. Guidance that once discouraged private equity in 401(k)s has been lifted.

Why is Wall Street so excited about this? Because 401(k)s represent a massive pool of capital. According to the Investment Company Institute, Americans hold about $8.7 trillion in their 401(k) plans. Fund managers want access to that money, and they’re already designing new products to fit inside retirement plans.

How It Might Show Up in Your Plan

If your employer offers a 401(k), you could start seeing these investments appear in two ways:

1. Inside Target Date Funds – where private market exposure is blended into the fund’s overall mix.
2. As Separate Options – listed on your investment menu alongside stocks, bonds, and mutual funds.

At first glance, this might sound like an exciting opportunity. But it’s important to understand the trade-offs.

The Potential Upsides

Private market investments can offer:

• Higher returns compared to public markets.
• Broader diversification, since they provide exposure to opportunities not available through traditional stocks and bonds.

That’s the appeal — but there’s another side of the coin.

The Trade-Offs You Need to Consider

These new options also come with unique challenges:

• Higher Fees – Private market funds are typically more expensive to manage than public market funds.
• Less Transparency – Reporting is less frequent, so it’s harder to know how your investment is performing in real time.
• Limited Liquidity – Your money could be tied up for 5–10 years, making it difficult to adjust or rebalance if your situation changes.

Three Questions to Ask If You See These Options

If your 401(k) plan starts offering private equity or private credit, don’t just jump in. Instead, ask yourself:

1. Does it fit my portfolio?
   Just because it’s available doesn’t mean it belongs in your retirement plan.
2. How is liquidity being handled?
   Target date funds usually consider your time horizon, but if it’s a stand-alone option, you need to be sure you can wait years to access this money.
3. What are the costs?
   Higher fees and limited reporting may eat into your returns. Make sure the potential reward justifies the trade-off.

The Bottom Line

This shift could reshape the way retirement plans look in the future. More choices mean more potential — but also more complexity.

Before adding private investments to your 401(k), it’s essential to weigh how they align with your time horizon, risk tolerance, and overall retirement goals.

At Clarity Wealth, we believe your retirement plan should work for you — not the other way around. If you see these options appear in your 401(k), it’s worth sitting down to review your portfolio before making a decision.

Because while change brings opportunity, it also requires caution.