Should You Invest in Private Equity Through Your 401(k)? What You Need to Know

Recent changes may allow private equity investments in retirement plans but is this a smart move for everyday investors?  

In July 2025, a new executive order brought private equity front and center in the world of retirement planning. For the first time, retirement plans like 401(k)s may allow investors access to private equity; investments in companies that aren’t traded on public stock exchanges. The news has generated a lot of buzz, and a lot of confusion. 

At Seaside Wealth Management, we believe in staying on the front lines of investment trends while staying rooted in the principles that protect your financial future. So, what does this mean for you and your retirement strategy? 

What Is Private Equity, and Why Is It Controversial? 

Private equity refers to investments made in privately held companies. It’s long been used by institutional investors, venture capitalists, and ultra-high-net-worth individuals to pursue outsized returns in exchange for higher risk and less liquidity. 

The catch? Private equity investments are complex, typically require long holding periods, and often come with high fees. These features make them less than ideal for most retirement savers, especially those without the resources to properly evaluate or diversify across these types of assets. 

Why Is This Being Considered for 401(k)s Now? 

The new push is part of a broader effort to “modernize” retirement plans and offer more investment flexibility. Advocates argue that including private equity could boost returns and improve diversification in retirement portfolios. And while that may be true in theory, the practical application might be another story. 

What to Consider Before Adding Private Equity to Your 401(k) 

If your 401(k) plan begins to offer private equity options, here are some key considerations: 

1. Liquidity Matters in Retirement: Private equity is not something you can sell at the click of a button. Most funds require you to lock up your money for years. That’s not ideal if you need flexibility with your retirement income or anticipate unexpected expenses. 
2. Fees Can Take a Big Bite: Private equity funds often carry high management fees, performance fees, and complex structures that can dilute your long-term returns. When you’re trying to grow your nest egg efficiently, cost control matters. 
3. Transparency and Risk Are a Concern: Unlike publicly traded investments, private equity doesn’t offer the same level of disclosure. You may not know exactly what you’re investing in, or how it’s performing. That’s a big risk for most individual investors. 
4. Diversification Can Be Achieved More Simply: You don’t need private equity to build a well-diversified portfolio. A mix of global stocks, bonds, real estate, and other liquid investments can provide ample growth potential with more predictability and lower cost. 

What We’re Telling Our Clients in North County San Diego

From Oceanside, Vista, San Marcos, through Carlsbad, and down the coast to Encinitas, Solana Beach and Del Mar, our advice is consistent: proceed with caution. For most retirement investors, the potential rewards of private equity don’t outweigh the risks, especially inside a 401(k), where simplicity, liquidity, and cost-efficiency are key. 

If private equity becomes available in your plan, it may be worth exploring, but only after understanding the fine print, evaluating your risk tolerance, and ensuring the rest of your retirement plan is rock-solid. 

Wrapping It All Up 

While it’s exciting to see more investment options emerging, more isn’t always better, especially when it comes to your retirement savings. If you’re unsure how changes like these might impact your long-term strategy, this is a great time to revisit your plan. 

At Seaside, we’re here to help you navigate the noise and keep your financial future on track, without taking unnecessary detours.