Breaking the 401(k) Illusion: The Retirement Reform No One Saw Coming
How Trump’s executive order lays the groundwork for a real retirement solution
On August 7, 2025, President Trump signed an Executive Order that may prove to be one of the most consequential retirement reforms in decades - perhaps ever.
Not because it created a new mandate.
Not because it rolled out another government savings plan.
But because it confronted the real reason 401(k)s have been failing everyday Americans: dysfunctional markets.
The reality is that early-stage growth has long been exiled from public equity markets, and not even the strength of the U.S. capital markets combined is able to produce enough public assets for real diversification.
Trump’s Executive Order exposes what almost no one in Washington has dared to admit: Wall Street is failing retirement savers.
In recent years, Americans have been sold the comforting fiction that their 401(k)s -restricted to narrow, homogeneous, cookie-cutter menus - have been delivering the strongest possible returns. In truth, their plans have been locking them out of the very asset classes where real wealth is built and risk-adjusted returns are maximized.
Fortunately, now that this 401(k) illusion has been shattered, a new blueprint for real retirement security can finally emerge.
The Data Doesn’t Lie
10 stocks make up 35% of the S&P 500 and nearly half of the NASDAQ-100.
The number of U.S. listed companies has been cut in half since 1996.
$40 trillion in mutual funds and ETFs chase the same 10 - 50 names.
The “Big Three” asset managers already control $22 trillion - on track for $30 trillion by 2040 - concentrating holdings in a way that drives correlation up and diversification down.
Diversification doesn’t come from repackaging the same dwindling pool of public stocks and bonds. Nor does maximum appreciation occur when IPOs arrive as billion-dollar behemoths well past their prime.
According to Cambridge Associates, PitchBook, and Prof. Jay Ritter (UF), cumulative pre‑IPO returns have historically outpaced post‑IPO gains by roughly 6:1. Late‑stage venture/private‑equity investors often realize 250 - 400% cumulative gains before the IPO, while public investors buying at the offering typically see only 30–60% over comparable windows. In today’s market, most of the growth curve is captured well before companies go public.
If your idea of diversification is shuffling the same seven mega‑caps across more funds, and if you think that 60% beats 400%, then I have a bridge - and another index fund - to sell you.
Since 2011, I’ve been sounding the alarm on America’s broken public markets. While many misdiagnosed America’s widening wealth gap as a tax-code problem, I’ve argued that the real culprit is defective market structure. And in recent years, true diversification has slipped even further as vital alternative asset diversifiers were instead used as political pawns.
In 2022, the diversification crisis escalated into an outright war on digital assets. The Biden Labor Department didn’t just signal skepticism - it staged an ambush. Just one day after announcing a “study” of digital assets, it issued a crackdown on crypto in 401(k)s. This wasn’t guidance - it was financial intimidation. Fiduciaries were put on notice: offer digital asset exposure, and face a possible federal investigation.
Not even the bipartisan SECURE Act 2.0 offered much hope. Branded as “retirement reform,” it piled on mandates, inflated costs, and centralized control - while doing virtually nothing to address the structural flaws undermining retirement investing. I outlined its absurdities in SECURE Act 2.0 Raises Questions But Offers Few Solutions, including the $70 million earmarked just to plan a superfluous government-run database.
What none of these policies touched was the real crisis: public markets had become monopolized, over-indexed, hostile to micro-caps, and severed from the entrepreneurial economy they once fueled.
For too long, the nation’s most promising growth companies have stayed private well past their prime IPO window - delivering their best risk-adjusted returns to venture capitalists instead of to everyday Americans via one’s retirement portfolio. And when public markets lock out earlier-stage growth, 401(k)s become nothing more than an exit strategy for the financially privileged.
Check out ICAN’s Capital Ideas podcast with Andrew Benson, founder of Hill.com, to learn why Series C–E deals sit in the sweet spot for risk-adjusted equity returns - and why locking them out of Americans’ 401(k)s has been one of the biggest wealth mistakes in modern retirement policy.
The real wealth disparity solution isn’t to tax the rich into oblivion - it’s to stop forcing retirement savers to bankroll the exit plans of America’s elite.
That’s why, in 2020, I praised the Department of Labor’s move to crack open the door to private equity in defined-contribution plans. My infographic at the time - and the chart below now - confirms what we all know to be true: real wealth creation happens before the IPO, not after.
Opening 401(k)s to private equity, alone, should have been a unifying win for savers. Instead, disingenuous talking heads tried to frame the DOL’s 2020 lifeline as a threat - just as some are doing now with President Trump’s latest Executive Order.
But you should know that the loudest critics aren’t safeguarding your retirement savings - they’re protecting the tollbooth they built around your money. Their panic reveals the truth: the balance of power is shifting back to those who contribute most to this nation - we the people.
This Executive Order Changes Everything
Here’s where this EO shatters expectations: unlike the 2020 DOL directive, it doesn’t confine alternatives to managed funds or “wrapper” products. Instead, it explicitly opens the door to direct access - within employer-sponsored retirement plans - to private equity, private credit, real estate, and digital assets1. The same vast array of investment opportunities that institutions and public pensions have enjoyed for decades now belongs to every American worker.
And it goes further: the EO instructs the SEC to actively consider reforms to the accredited investor definition - yes, that “unconstitutional” rule that has locked most Americans out of alternative assets for more than 40 years. If the SEC follows through, we could finally dismantle one of the most restrictive barriers in U.S. capital markets history.
It also directs the DOL to create safe harbor protections, ending the litigation paralysis that has handcuffed fiduciaries and kept retirement savers boxed into outdated 60/40 allocations.
This isn’t just policy evolution - it’s a structural shift that could democratize capital access on a historic scale. If implemented fully, it could redefine the architecture of 401(k) menus, replacing mutual-fund monopolies with genuine multi-asset platforms.
Senator Warren, the darling of mega banks, wasted no time denouncing the Executive Order as a “giveaway to billionaires.” She could not be more wrong.
Billionaires already have private equity, venture deals, pre-IPO allocations, and boutique yield instruments. Trump's EO doesn’t empower them.
It empowers us.
It empowers the retail saver who wants more than a 60/40 mix of the same seven tech stocks and a handful of bond funds.
It empowers the fiduciary who wants to offer truly diversified options without risking their license.
It empowers the innovators who will shape the next century, and the entrepreneurial spirit that built America in the first place.
Proof in the Numbers
Since September 2014, a traditional 60/40 portfolio (60% S&P 500, 40% bonds) achieved an 8.79% annualized return with a Sharpe ratio of 0.63.
The diversified alternative portfolio - 40% S&P 500, 10% Bitcoin, 10% private equity (Series A–D), 20% private credit, and 20% public credit - delivered a 14.95% CAGR with a Sharpe ratio of 1.09 over the same period.
That’s a 70% improvement in annualized returns and a 73% boost in risk-adjusted performance - exactly the type of outcome Trump’s Executive Order could make possible for every American worker.
The math is clear: when you remove the regulatory barriers that keep retirement portfolios trapped in a handful of public-market assets, performance potential jumps and volatility risk actually drops relative to returns.
The Path Forward
We now stand on the cusp of a new financial future. One where:
Modern retirement vehicles provide direct access to high-quality alternative assets.
Everyday Americans can hold real estate, private equity, private credit, and digital assets inside their employer tax-advantaged plans.
Advisors can meet their fiduciary obligations without fear, offering products that truly guard against systemic volatility.
TradFi (Traditional Finance) will still flourish - because true diversification means embracing both traditional and alternative products.
It’s been over 30 years since diversification became a fiduciary mandate, yet the Elizabeth Warrens of the world still treat it as a privilege reserved for the wealthy.
That era is ending.
Mark my words: a new retirement architecture is coming - one that restores freedom, fairness, and opportunity to the people who’ve been excluded for decades, without destabilizing the public markets we still rely on.
This Executive Order is not the finish line.
It’s the rise of a retirement system that finally works for everyone.
Some coverage of the August 7th Executive Order has interpreted its language to mean that crypto access in 401(k)s is restricted to actively managed products. I don’t read it that way. While the EO does list “holdings in actively managed investment vehicles that are investing in digital assets” as one category of alternative assets, it also explicitly includes “private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges.” By definition, digital assets that are not traded on registered public exchanges fit into this broader “other financial instruments” category, which is framed to permit direct as well as indirect holdings. The “actively managed” language appears to be illustrative, not restrictive - a political signal of comfort with professional management rather than a legal prohibition on direct exposure.