From Stocks to Real Estate: The Future of 401(k) Investing

On August 7, 2025, President Trump signed a landmark Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors”. This directive aims to broaden investment horizons by allowing real estate, alongside private equity and cryptocurrency, within 401(k) and other defined contribution plans (White House Fact Sheet).

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Why It Matters for Retirement Investors

Traditional retirement portfolios focus on stocks, bonds, and cash. The potential inclusion of real estate could:

• Enhance diversification and reduce reliance on public equity markets

• Offer potentially higher long-term returns compared to stocks and bonds (Investopedia)

• Provide exposure to tangible, income-generating assets like rental properties or commercial developments

However, this shift also brings:

• Liquidity challenges: Real estate isn’t easily sold for cash

• Valuation complexity, since assets aren’t priced daily like stocks

• Higher fees for asset management and administration

• Regulatory and fiduciary risks under ERISA (JD Supra)

What’s in the Executive Order?

The Order expands the definition of alternative assets to include:

• Direct and indirect interests in real estate (including debt instruments)

• Private equity, private debt, digital assets, commodities, and infrastructure

It directs the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) to:

1. Reevaluate fiduciary guidance under ERISA within 180 days

2. Clarify how fiduciaries can prudently consider alternative assets

3. Coordinate with other agencies for consistent rules

4. Potentially create safe harbors to reduce litigation risk

What Supporters Say

Proponents of the policy argue it’s a necessary modernization of retirement investing.

• Access to high-return opportunities: Many institutional investors, like pension funds and endowments, already benefit from real estate and other alternatives. Extending this to 401(k) savers could narrow the wealth gap in investment returns.

• Inflation hedge: Real estate often outpaces inflation, making it a valuable long-term asset class (Kiplinger).

• Portfolio diversification: Adding real estate can lower overall portfolio volatility, especially during stock market downturns.

• Freedom of choice: Supporters frame the change as giving Americans more control over their own retirement planning.

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What Critics Argue

Opponents warn the move could expose average investors to outsized risks.

• Lack of liquidity: Unlike stocks, real estate can’t be sold quickly without potentially taking a loss.

• Opaque valuations: Without daily pricing, participants may not know the true value of their holdings until they try to cash out.

• High fees: Private funds often have significantly higher management costs, eroding returns over time (The Guardian).

• Fiduciary liability: Plan sponsors could face lawsuits if these investments underperform or are deemed unsuitable for participants.

• Investor sophistication: Critics argue that alternative assets require due diligence and risk assessment that many 401(k) participants are not equipped to handle.

Industry Response: Cautious Optimism

Financial giants like BlackRock, Blue Owl Capital, and Empower have expressed interest in creating products that include real estate and other private assets. But industry insiders emphasize:

• Plan sponsors must be careful in product selection

• Education will be key to help investors understand liquidity, fees, and risks

• Fiduciary guidelines from the DOL will heavily influence adoption (ABC News)

The Road Ahead

For now, the inclusion of real estate in 401(k) plans is still in the regulatory pipeline. Investors, plan sponsors, and asset managers should closely monitor forthcoming guidance from the Department of Labor (DOL) and the Securities and Exchange Commission (SEC), as these rules will determine how (and if) real estate products can be offered in retirement accounts.

In the meantime, it’s wise to review existing investment policies, assess operational readiness for alternative assets, and explore potential product structures that balance return potential with accessibility.

Early preparation will help stakeholders move quickly once the regulations are finalized.

For Plan Sponsors & Fiduciaries:

• Review plan investment policies

• Prepare to evaluate new products when regulations are finalized

• Monitor for safe harbor provisions

For Asset Managers:

• Design products that balance returns with accessibility

• Offer participant education tools

• Ensure compliance with evolving ERISA standards

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Bottom Line

The inclusion of real estate in 401(k) plans could mark a transformative moment in retirement investing, offering diversification and potential inflation protection. For some, it opens access to high-return opportunities once reserved for institutional investors.

But with potential rewards come significant risks, from illiquidity to valuation uncertainty. How this plays out will depend heavily on upcoming regulations and the quality of investor education. For now, cautious optimism, paired with due diligence, is the wisest approach.

If you’re a real estate professional, developer, or marketer wondering how to position properties for investors in this new landscape, Fourth Wall Production can help. Our media production services showcase real estate with cinematic quality, creating a compelling visual narrative for investors and buyers alike.

Related FAQ's

Q: Can I invest in real estate through my 401(k)?

A: Not yet. While President Trump’s Executive Order opens the door for real estate in 401(k) plans, implementation depends on guidance from the Department of Labor (DOL) and the Securities and Exchange Commission (SEC).

Q: What types of real estate could be included in 401(k) plans?

A: Potentially both direct and indirect investments, such as commercial properties, residential rental portfolios, and real estate investment trusts (REITs), depending on the final regulations.

Q: What are the benefits of adding real estate to a 401(k)?

A: Real estate can offer portfolio diversification, potential inflation protection, and higher long-term returns compared to traditional stocks and bonds.

Q: What are the risks of investing in real estate through a 401(k)?

A: Risks include illiquidity, complex valuations, higher fees, and potential fiduciary liability for plan sponsors if investments are deemed unsuitable.

Q: How will fees for real estate in a 401(k) compare to traditional investments?

A: Real estate and other alternative assets typically come with higher management and administrative fees, which could impact net returns over time.