U.S. President Donald Trump signed an executive order that allows 401(k) retirement savings plans to invest in a wider range of assets. These now include private equity, real estate, and for the first time, crypto assets.
This move gives the crypto market a form of national-level endorsement. It sends a clear signal that crypto is becoming more mainstream and mature. For pension plans, it expands the range of possible investments and returns, but it also adds higher volatility and risk. In the crypto world, this is a milestone moment.
Looking back, the change is similar to a key shift in the history of pensions during the Great Depression. At that time, most pensions were based on defined benefit plans, where employers promised fixed payments after retirement. Investments were conservative, focusing on safe assets like government and corporate bonds. This approach worked in good times but limited returns.
The Great Depression, starting with the 1929 stock market crash, caused massive economic damage. Even though pensions held little stock, many employers went bankrupt and could not pay promised pensions. This eroded public trust and led to federal action, including the 1935 Social Security Act. For years after, stocks were considered too risky for pension funds.
Over time, falling bond yields made it harder for pensions to deliver returns. After World War II, the “Prudent Man Rule” began to allow more flexible investments, including limited stock holdings. In 1950, New York State permitted up to 35 percent of pension funds in stocks. Other states followed, but with strict limits and a focus on safer blue-chip companies. While controversial at first, the shift paid off during the post-war bull market and gradually became accepted.
By the 1960s, a large share of pensions was invested in non-government securities. In 1974, the Employee Retirement Income Security Act set a national standard for prudent investing. Although the 2008 financial crisis caused heavy losses, stock investing remained part of pension strategies.
Allowing crypto in 401(k) plans is similar to the earlier move into stocks, but riskier. Crypto is newer, less mature, and more volatile. Support from regulators and education on risks will be important for public acceptance. If the market enters a long growth cycle, pensions could benefit in the same way they did from stocks. Since 401(k) funds are locked in for the long term, buying crypto through pensions is like building a strategic reserve.
A 401(k) is a retirement savings plan offered by employers and regulated under U.S. tax law. Employees can contribute part of their paycheck into their account, often with matching contributions from employers. The money is invested in a selection of funds chosen by the employer, and employees decide how to allocate their savings. The gains belong to the employee, but so do the risks if investments lose value. The new policy means crypto can now be one of these investment options.