Money Monday: Trump Administration eyes loosening 401(k) investment rules, Paul Hood offers advice

The Trump administration is considering changes that could expand 401(k) investment options, including cryptocurrency and real estate. Financial expert Paul Hood says more choices could be good—but warns investors to tread carefully.

Q: What is the change the Trump administration is putting in?

Paul Hood: “Most 401(k)s have very restrictive investments you can choose, and part of that is because the employer, by setting it up, has a little bit of risk. And really, you’ve heard me enough say that your 401(k), and actually people call it the automatic millionaire plan, that buying in every month, so if the market’s high, yay, if the market’s low, double yay, because you’re buying it on sale.”

Q: What kinds of new investments could be allowed?

Paul Hood: “Trump is obviously, I don’t know if he’s a proponent, but he’s not against crypto. And there’s been a lot of discussion on whether you should be able to take your 401(k) and invest in crypto because there are established markets. There’s also been talk about being able to invest in real estate, traditional real estate. I think they’re great. I think people, you know, should be able to make their own decisions. I just caution, you know, you really shouldn’t make investment decisions based on fear or greed.”

Q: What are the risks of investing in crypto or real estate with retirement funds?

Paul Hood: “Right now, a lot of the crypto volatility is seemingly driven by fear and greed, as far as I can tell. So I’d be careful. You also got to be real careful with the IRS, especially if they allow you to do real estate. If you invest your 401(k) in a rental home and then you take some of that money and go buy a hammer and hang it in your garage, the IRS can say you just got some economic benefit and disallow your entire IRA.”

Q: How soon could this happen?

It’s not something necessarily that’s happening overnight. There’s a lot of regulations that have to be still ironed out.

Paul Hood: "And the Department of Labor is real heavy in the middle of that, and their job is to protect the local person. So we’ll see how that turns out.”