New Rollbacks Should Make You Want To Check Your 401(k) More Than Ever

The Department of Labor (DOL) recently rolled back some of the regulations around what fiduciaries can invest your 401(k) in. This is being framed as “access” and “innovation,” but the better way to look at it is that Wall Street just got a new distribution channel. When institutions start pulling back from private markets—or at least getting more selective—the industry needs fresh capital to keep deals moving and valuations propped up— otherwise the air could be let out too quickly.

Enter the $13+ trillion sitting in 401(k)s. Wrap private equity or credit inside a target date fund, call it “diversification,” and now you’ve got a steady stream of retirement dollars flowing into assets that are harder to price, harder to exit, and much easier to dress up on paper than public markets. The average participant won’t know what they own, won’t understand the liquidity constraints, and won’t have any real ability to evaluate whether the returns are worth the fees and risk. That’s not access—that’s packaging.

And when this cycle turns—as it always does—the exit door won’t be equal for everyone. Institutions negotiate terms, get better transparency, and often get out first. Retail retirement investors don’t. They’ll be sitting inside daily-priced 401(k) wrappers holding assets that don’t actually trade daily, with valuations that lag reality and fees that don’t go away. If performance disappoints, it won’t be the product sponsors or fund managers eating that risk—it’ll be the participant who thought they were just buying another diversified retirement option. This isn’t about improving portfolios; it’s about shifting who ultimately absorbs the downside when private markets get stretched.

Now more than ever, it is important for everyone to review their retirement account holdings and ensure they have their money in the most suitable asset classes. If you like the concept of a target fund that adjusts your risk exposure as you get closer to retirement, something I wrote about only a year ago — you probably should just do it yourself with the low-cost index funds available to you that will give you low-cost exposure to the S&P 500, Bond, Small Cap Stocks, and any other index you’re looking to invest in. Don’t be lazy. Now it could cost you more than just the half a percent or so in fees you were paying before. Because we don’t know what else these funds are going to invest in down the road.