New 401(k) options are here — what fees and risks should savers watch for?

Most workers can only pick from a small list of funds like bonds, stock funds, and target-date funds. These funds mix different assets and slowly become safer as you get closer to retirement, according to GOBankingRates. For many years, plans limited choices, but new rules are now allowing more flexibility.

In August 2025, President Donald Trump signed an executive order that opened the door for new 401(k) investment options. The order allows the Department of Labor to adjust ERISA guidance to clearly allow alternative investments. Future 401(k) plans could offer access to private equity, private real estate, and digital asset funds, according to GOBankingRates.

New 401(k) choices

Just because you can invest in private equity or crypto does not mean you should. Experts say full fund menus will not change overnight, according to Justin deTray of Wealthspire Advisors. The most realistic change is updates within target-date funds, not brand-new menus, according to Justin deTray, CFP, managing director at Wealthspire Advisors.


These new target-date funds may include small amounts of private credit, private equity, or private real estate. These updated funds are already being discussed and designed. Most people will struggle to decide if a TDF with alternatives is better than a traditional one. The difference in fees between old and new funds is easy to see. Knowing whether the extra cost makes sense is much more difficult.

Higher fees risk

Private assets do not guarantee higher returns than regular stocks or bonds, according to GOBankingRates. How alternatives perform depends on the investment and market conditions. These accounts let professionals manage your investments, but they cost more. Even with expert help, the final decision belongs to you. Over the last 10 years, returns in private markets have been very uneven. The only sure thing with alternatives is higher fees, while better returns are just a guess.

Alternatives add risks beyond just higher costs, according to GOBankingRates. Alternative assets are harder to sell quickly than public stocks and bonds. Public markets offer daily access and stability, especially during stress. Many private funds limit redemptions during market stress. Restrictions often happen exactly when people want access to their money. Putting private assets inside larger funds could reduce some liquidity issues.

Diversification confusion

Some investors may still decide the trade-off is not worth the trouble. Investors often get only small return changes but face more complexity and higher fees. Investors may think they are spreading risk, but that is not always true. In a real crisis, both can suffer at the same time and limit withdrawals. Investors may lose access to money while still paying high fees. Such combinations are hard to justify for most 401(k) participants. They can work in some situations.

Allocations of 5% to 10% or more, with strong managers, may help returns. Big investors argue that private assets can improve long-term results. These investments require patience, tolerance for complexity, and less access to cash. What works for one investor may not work for you, according to GOBankingRates. Fund managers may promote alternatives, but that does not mean they fit your needs. Because 401(k) money is for retirement, mistakes can be costly. New 401(k) options bring opportunity, but also higher fees, risks, and complexity.

FAQs

Q1. What new investment options may be added to 401(k) plans?

Some 401(k) plans may add private equity, private real estate, or digital asset funds, but usually in small amounts.

Q2. Are higher fees the main risk with new 401(k) options?

Yes, these new options often charge higher fees and do not promise better returns.