President Donald Trump’s push to open 401(k) retirement plans to private equity, cryptocurrency, real estate, and other high-risk assets comes as many Black Americans are already facing new threats to their long-term financial security.
Recent mass cuts to the federal workforce — where Black Americans make up just under 20% compared to roughly 13% of the civilian workforce — have disrupted what has long been a source of stable jobs and reliable retirement benefits. Meanwhile, prices on consumer goods have continued to rise while the value of the dollar has dropped more than 10% this year.
Now, Trump’s executive order directs the Labor Department to rewrite its rules within 180 days to make alternative investments a standard 401(k) option, while instructing the Securities and Exchange Commission to find ways to increase access.
401(k) plans are employer-sponsored retirement investment vehicles that roughly 35% of Americans adults reported using in the 2020 census. The National Association of Plan Advisors (NAPA) wrote in a 2021 study that 63% of Black investors first invested into the stock market through a retirement plan.
The move could give Wall Street a path to tap into a portion of the $12.2 trillion in U.S. retirement savings, but critics warn it will shift far more risk to workers — particularly those without substantial wealth or investment experience.
“There’s not as much information about the companies, and it could be hard to sell your investments — especially during a panic,” Robert Brokamp, a financial planning expert, told NBC News.
While traditional target-date mutual funds may charge around 0.3% in fees, private funds can take 1% to 2% in management fees and up to 20% in performance fees.
Stable coins are also not granted the same protections by the Federal Deposit Insurance Corporation (FDIC) as traditional bank accounts.
Anh Tran, a certified financial planner and attorney, added that without strict limits, such as capping exposure to 5% to 10% of a portfolio, “investors could be exposed to unnecessary risk, misaligned expectations and potentially irreversible losses.”
Knut Rostad, president of the Institute for the Fiduciary Standard, said the result could be “a massive train wreck where many people are seriously hurt. Their retirement accounts will be annihilated.”
For Black Americans, the stakes are higher. Studies show Black households have less exposure to the stock market, face barriers to homeownership, and often support extended family members — factors that widen the racial wealth gap over time. With the erosion of secure federal jobs and the introduction of riskier 401(k) options, financial experts say safeguards, transparency, and education are essential before any large-scale rollout.
As Tran told NBC News, “Otherwise, we could be setting the stage for not only financial loss, but economic and social consequences.”
Some banking executives, including former SoFi chief executive Mike Cagney, note that for every dollar moved into cryptocurrencies, a dollar is removed from the traditional banking system and bank deposits.
“The genie is out of the bottle. You don’t need a lot of deposit flight to really buckle the banks,” said Cagney in an interview with The New York Times.
