Trump's "Alternative Assets for 401(K) Investors" - another "Big and Beatiful"?

[Dan Ikon]

So it appears (and correct me if I am wrong) - a big change affecting Real Estate investment. 

Does it mean one can invest his/her 401(K) in RE directly, bypassing SDIRA structure? What else changed? When does it come in effect?

[Jason Malabute]

Dan,

Big players like BlackRock did push for this change, but most see it as just a first step and aren’t rushing in because of the current legal risks. Private placements—such as many real estate investments—don’t have the same disclosure rules as public market investments, and when deals go bad, ordinary investors can lose money while accredited investors may be shielded. Now, with this order, retirement savers could put their 401(k) money into these types of investments without fully understanding the risks, which raises the potential for significant losses and legal liability for sponsors. Because of these concerns, large reputable firms are expected to adopt the change slowly, while more questionable sponsors might jump in quickly. According to Reuters, BlackRock plans to launch a retirement fund next year with private equity and private credit assets, but experts warn this shift won’t happen overnight and lawsuits are likely from investors who don’t grasp the complexity of these investments. BlackRock’s CEO has also admitted the change poses major operational and legal challenges. Litigation risk remains high for defined contribution plans, and although the Department of Labor has issued guidance before, few firms have acted on it due to fear of lawsuits.

In short, this opens the door for alternative assets in 401(k)s, but it doesn’t yet make bypassing SDIRAs a straightforward or low-risk option.