YouTube Deep SummaryYouTube Deep Summary

Star Extract content that makes a tangible impact on your life

Video thumbnail

Private equity in retirement plans: Here's what 401k owners need to know

CNBC Television • 4:02 minutes • Published 2025-07-16 • YouTube

🤖 AI-Generated Summary:

📹 Video Information:

Title: Private equity in retirement plans: Here's what 401k owners need to know
Channel: CNBC Television
Duration: 04:02
Views: 710

Overview

This video segment discusses the potential impact of a forthcoming executive order from President Trump aimed at making private market investments more accessible within U.S. retirement plans, such as 401(k)s. CNBC’s Sharon Epperson explains how these changes could affect individual investors, the broader financial industry, and highlights both opportunities and concerns surrounding the move.

Main Topics Covered

  • Possible executive order to expand private market investments in retirement accounts
  • How private assets might be integrated into 401(k) plans (e.g., via target date or balanced funds)
  • The scale and demographics of 401(k) assets
  • Potential beneficiaries (investors and financial industry players)
  • Controversies and consumer risks
  • Concerns about investor understanding and guidance

Key Takeaways & Insights

  • President Trump is expected to sign an executive order that could provide Department of Labor and SEC guidance, enabling private market investments to be included in mainstream retirement vehicles like 401(k)s.
  • Major asset managers (e.g., BlackRock, Apollo) stand to benefit significantly if private assets gain access to the $12 trillion U.S. 401(k) market.
  • While the move could “level the playing field” and provide new opportunities for retirement savers, private investments are typically less liquid, less transparent, and carry higher fees compared to traditional public market options.
  • There is concern that most retirement savers may not understand these complex investment products, especially as many already struggle with basic funds like target date or S&P 500 index funds.
  • The track record of private market investments is relatively short compared to public markets, raising questions about their suitability and risk profile for average retirement investors.

Actionable Strategies

  • Investors should seek independent financial advice before considering private market investments in their retirement accounts.
  • Evaluate your own financial situation and investment knowledge before opting into more complex, less liquid asset classes.
  • Understand the specific features, risks, and fees associated with any new investment options added to your 401(k) plan.
  • Avoid rushing into alternative investments as a “quick fix” for retirement shortfalls.

Specific Details & Examples

  • The U.S. 401(k) system holds approximately $12 trillion in assets.
  • Average 401(k) balances vary by generation: about $127,000 overall, just over $10,000 for Gen X, and nearly $250,000 for baby boomers.
  • BlackRock and Apollo are specifically mentioned as firms poised to benefit from the inclusion of private investments in retirement plans.
  • Some plan providers, like Empower, are supportive of these changes to broaden access.

Warnings & Common Mistakes

  • Many investors do not currently understand even basic investment options in their 401(k) and may be ill-equipped to evaluate private market investments.
  • Private assets are less liquid and less transparent, with higher fees than traditional investment options—potentially making them unsuitable for many.
  • There is no long-term performance record for these asset classes within retirement plans, increasing uncertainty.
  • Investors should be wary of viewing alternative investments as a solution for inadequate retirement savings without fully understanding the risks.

Resources & Next Steps

  • Seek independent financial advice before making changes to your investment strategy.
  • Monitor Department of Labor and SEC announcements for regulatory updates.
  • Review educational materials from your retirement plan provider regarding new investment options.
  • Stay informed through reputable financial news outlets like CNBC for ongoing coverage and analysis.

📝 Transcript (156 entries):

[00:02] Peacock. >> Welcome back to Power Lunch. President Trump is reportedly expected to sign an executive order in the coming days that would help make private market investments more available to U.S. Could pave the way for big managers of these private assets to access the vast sums of retirement savings held by workers who don't have a traditional pension. What it [00:24] could mean for you and your [00:26] money let's ask no one better [00:28] than CNBC senior personal [00:29] finance correspondent Sharon [00:30] Epperson. Sharon, we've talked about crypto and retirement plans. And I guess there's you could do some of this now, but a lot of people aren't doing it because they're concerned about the fiduciary and all the rest of it. If this now becomes a bigger, safer thing to do, just walk us through how it might work, what the options to people might look like. >> Well, this what we're talking about is the president perhaps giving guidance to the Department of Labor and the Securities Exchange Commission about how this could work by putting private market investments into target date funds, into balanced funds within a 401 K plan. And so this [01:04] is something that Trump has been [01:06] signaling he's very interested [01:08] in since 2020. He's sent an information letter out, you know, the Department of Labor under him saying that this could be an additive to 401 K plans. The way that it would work is when you look at the amount of assets that are available in the 401 K industry, some $12 trillion in assets, there is a lot of potential for those who have private market investments to want to have them in 401 K plans. The reality is, the average account balance for a fidelity 401 K holder at the end of the first quarter was $127,000, and we're talking about just over 10,000 for a Gen X'er if you look at different generations and two almost 250,000 for baby boomer. So the way that would work is for investors who have more sizable assets. [01:56] >> That's what I was going to [01:58] ask. >> Not everybody. >> Could access it. >> Everyone will be able to access it. >> Not just. [02:02] >> The. >> People. >> But the people who are not just accredited investors, but the people who it probably would be best for based on the financial advisors that I've spoken to. And you have as well, would probably those be those who have significant assets already. >> In our interview yesterday about energy and energy infrastructure, Larry Fink of Blackrock kind of alluded to this. He said, well, soon, and [02:20] I'm paraphrasing, I should have [02:21] the direct quotes. I don't want to screw it up, but it was something like, well, soon we're going to have access to private capital in your 401 K, something like that. Blackrock and firms like that would benefit big time. If this were to. >> Happen, they would benefit big time. And so that's why [02:36] firms like Blackrock Apollo is [02:38] also very interested in this. Even there are some retirement plan providers who are saying, yeah, this makes sense to do like empower. They want to make sure that that's available to their 401 K holders to, as they would say, level the playing field. But there's a lot of controversy over if people don't understand today how a target date fund works, right. As it stands now, or maybe not even how an S&P 500 fund works, they're just defaulting into whatever the default is for their plan, adding something that is an alternative investment that is less liquid, less transparent, that has high fees. Not sure if this is [03:15] something that is truly for [03:17] everyone, right? >> I mean, I worry a lot that it's basically great for the industry and this huge, huge win for private equity, private credit and all the rest of it. I'm not sure there's enough of a track record to say this needs to be part of anyone's retirement portfolio also, because in a way, this asset class is still so young. It's like when we say the America is still young, you know, relative to the stock market, this is still very young and it hasn't been tested through many, many, many decades of returns in order to know kind of what position exactly it should occupy and why. >> Well, the concern that financial advisors I've spoken to say is that people are always looking for a quick fix, and so I haven't saved enough. Maybe [03:53] this will help me meet my meet [03:55] my retirement goals, not [03:56] understanding all the [03:56] challenges. The other concern is are they getting up independent financial advice, not from a pl