Commentary: Big Tent Ideas

Expanding Opportunity For America’s Savers

Unsplash/Andre Taissin

For too long, access to some of the most valuable segments of the global economy has been limited to a select group of investors. Large institutions – pension funds, endowments, and sovereign wealth funds – have diversified into private markets, infrastructure, and other alternative assets that can enhance long-term returns. Meanwhile, most Americans saving through 401(k)s have been left with a narrower set of options.

That divide no longer reflects today’s economy – and it is increasingly difficult to defend.

More importantly, America’s retirement system isn’t working well enough for the average saver. One-third of Americans have no retirement savings at all, and for many others, a 401(k) is their only investing experience – yet these plans are not delivering pension-level outcomes. The current system has focused primarily on preventing poverty in old age – a “safety net.” What Americans need is a system that also functions as a “ladder,” enabling wealth-building and long-term financial dignity.

The shift away from traditional pensions has placed greater responsibility on individuals, but the tools available to them have not kept pace. Savers are being asked to do more with less – fewer options, less diversification, and limited access to areas where much of today’s economic growth is occurring.

Expanding investment options – in other words, democratizing investing – is one way to correct that imbalance.

Today, trillions of dollars sit in low-yield savings while private market growth remains largely restricted to wealthier investors. Yet private markets now represent a growing share of economic activity. In 2024, private markets assets under management (AUM) totaled approximately $15 trillion, up from $11.87 trillion in 2023 and $10.89 trillion in 2022. Many companies stay private longer, and key phases of innovation occur outside public exchanges, leaving everyday investors excluded.

This exclusion has real costs.

Pension plans, also known as defined benefit plans, have increasingly incorporated private assets over the past several decades to enhance returns and smooth volatility. Access to private markets enhances compounding through three key forces: the illiquidity premium, value creation, and structural stability. By contrast, 401(k) savers who lack this exposure may be leaving as much as nearly 15 percent in lifetime returns on the table due to compounding. Even one percentage point of additional return compounds to a $365,000 advantage over three decades. A more diversified approach can offer inflation protection, reduce volatility, and improve long-term outcomes.

Importantly, private assets are not prohibited in retirement accounts – the barriers are structural, not legal. Concerns around fees, transparency, and liquidity are real, but they are increasingly being addressed through improved fund design, better data, and stronger fiduciary oversight. Innovation and education – not outright exclusion – are the more appropriate responses.

Policymakers are beginning to recognize this. The Department of Labor’s proposed rule expanding access to alternative investments in 401(k) plans is a long-overdue step toward aligning retirement policy with today’s investment landscape. By clarifying how fiduciaries can evaluate these assets and establishing process-based safe harbors, the proposal reduces uncertainty while maintaining strong protections.

This is not about steering investors into specific assets. It is about restoring flexibility – allowing fiduciaries to evaluate options based on fees, performance, liquidity, and complexity while encouraging competition and innovation. Put simply, it allows the market to function more effectively by expanding the range of choices available to improve retirement outcomes. Concerns about risk should be taken seriously, but so should the risks of inaction. Limiting access can mean limiting returns, particularly as value creation shifts outside public markets.

Recent policy momentum underscores that progress is possible. President Trump’s executive order on expanding access to alternative assets signaled a commitment to broader opportunity. Continued efforts to reduce unnecessary barriers can help bring down the gates separating everyday investors from institutional advantages.

The retirement crisis is real, but it cannot – and should not – be solved by government spending alone. Our three-legged stool for retirement – Social Security, employer pensions/retirements, and personal savings – still stands, but the balance has shifted heavily toward individual responsibility. Expanding investment choice is a market-based solution that empowers individuals with better tools and broader access.

A more inclusive investment system – one that expands access to a broader range of asset classes – can better equip Americans to build wealth, not just avoid hardship. By modernizing investing and closing the gap between institutional and individual access, we can improve outcomes for savers while ensuring the gains of economic growth are more widely shared. An economy that works for more investors ultimately works better – period

Hassan Tyler is an accomplished policy analyst specializing in economic and international relations. He is currently a Senior Board Member at the Savings and Retirement Foundation in Washington DC, and he brings a wealth of experience from a career dedicated to navigating complex economic issues and public policy.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.