President Trump wants to “open up workers’ retirement plans to his pet industries,” said Sam Gustin in The New Republic. The Labor Department recently proposed a long-awaited rule that would shield 401(k) plans investing in crypto and private equity and credit markets from getting sued over excessive risk—no minor concern since crypto prices have cratered in the past six months. “The stakes are enormous.” A 1% shift of funds would flood “more than $100 billion in new capital” into troubled sectors in desperate need of a bailout. This is just another way for Trump, whose family has billions of dollars in crypto, to use the presidency as a “giant ATM for himself, his family, and his cronies.”
Actually, the Labor Department’s proposal will make “retirement better for millions of Americans,” said Charles E.F. Millard in The Wall Street Journal. The idea is to let “fiduciaries be fiduciaries” and protect them from “frivolous litigation” when they seek the best investments. If the plan goes ahead, 401(k)s will look “more like traditional defined-benefit pension plans,” in which investment management and risk management was left to the employer, who could then “use the actuarial law of large numbers to pool longevity and investment risk and provide an income that retirees could count on.” Critics on the Left say the little guy will get bamboozled” as huge swaths of people’s hard-earned savings get shoved “willy-nilly” into risky assets. But “that’s just politics.” This proposal “is all about retirement security” and freeing professionals to find “lifetime income solutions” for their clients.
Retirement plans are long overdue for an update, said The Washington Post in an editorial. Most existing rules date to 1979, long before cryptocurrencies and other digital assets existed, and they have deprived employees of the “chance to gain more of a stake in the entire U.S. economy.” The private capital market grew from “$2 trillion in 2008 to $13.7 trillion in 2023”—why shouldn’t workers get a piece of that? Sure, investing everything in such assets “would be a bad idea,” but diversifying portfolios with 5% here and there reduces portfolio risk as opposed to adding to it.
This is no time to expose retirement funds to the private credit market, said Alan Rappeport and Colby Smith in The New York Times. “Cracks have begun showing” in the $3 trillion market as funds start to cap investors’ redemption requests. Private loans are already at risk of defaulting at rates not seen since the pandemic, and the situation will only get worse as AI scrambles the prospects for software firms. Some economists now see “echoes of the run-up to the 2008 financial crisis.” If Americans’ wealth gets bound up in the fate of these funds, a “broader private credit meltdown could become a political liability for Trump.”
Does Bitcoin belong in your 401(k)?