For years, most Americans’ retirement savings plans have been locked out of certain investment choices, including some of the market’s best performing assets. That makes it harder to save for retirement. Fortunately, though, this is about to change, giving savers new—and better—options for their investments.

At issue are not only the many rules and regulations surrounding what can go into 401(k)s and similar savings plans, but also the flimsy legal framework governing fiduciaries—the ones who manage your money. Many investment options are excluded, either by law or by common practice, as fiduciaries try to avoid both legitimate and frivolous lawsuits.

Asset classes like private equity, digital assets, and real estate effectively became the purview of “accredited investors” with very high net wealth and government workers with public pensions. Most Americans—those private-sector workers on Main Street—were left out.

For folks with a typical 401(k) retirement plan, this meant lower returns on their investments. U.S. private equity has delivered the highest long-term returns compared to public equities and other asset classes—even after fees—averaging 3 percentage points (about 20%) better annual growth than the S&P 500.

The disparity has been exacerbated in recent years because of volatile inflation and interest rates which have crushed bonds. The Biden administration oversaw the bond market’s worst four-year run in a century. The traditional 401(k) allocation, which is heavy in fixed-income assets, performed very poorly, especially compared to private equity.

The groundwork for a seachange was laid last August, with President Donald Trump’s executive order that directed agencies to clean up the rules around investment savings and provide a more robust legal framework for fiduciaries. The Department of Labor has now responded with historic reforms that will empower savers and keep the trial lawyers at bay.

The reforms make it easier for retirement plans to consider private-market exposure, while clearly outlining how fiduciaries still must prioritize prudence within their clients’ portfolios. It’s a healthy balance to help achieve the highest risk-adjusted rate of return.

The move has bipartisan support, with 57% of voters favoring expanding retirement investment options, and 61% supporting private equity access, specifically. Put simply, Main Street wants access to Wall Street, and that access has become increasingly difficult under the current regulatory morass.

Restricting the average American to investing in publicly traded companies has been increasingly stifling. From 1997 to 2024, the number of publicly traded companies was cut by more than half, from about 8,800 to less than 4,000. Consequently, it has become more difficult for savers to diversify and protect their investments.

Additionally, the S&P 500’s gains in 2024—and more recently—were driven in substantial part by just seven large-capitalization technology companies, further underscoring the need for alternative investments in retirement portfolios.

Retirement planning should change as the economy does. With companies taking longer to go public, private firms now represent about 87% of all U.S. companies, up from 62% in 2002. This regulatory reform creates a level playing field with an asset-neutral framework, meaning no asset class is inherently prudent or imprudent.

That’s important for savers because not all bonds, stocks, or private equity are created equal. To treat every mutual fund or bond fund as if they’re a prudent investment based solely on their asset class is absurd. It’s like saying Spirit Airlines—which went out of business—and American Airlines—which remains profitable—were equally prudent investments.

Despite this proposed rule change being both popular and sensible, people like Sen. Elizabeth Warren, D-Mass., are decrying the change as a Wall Street ploy. Ironically, her own state’s public pension fund has greatly benefited from investing in private equity, earning almost 17% annual returns for the last decade, the fourth best among 200 U.S. public pension funds.

Better returns on investment shouldn’t be confined to government workers or Wall Street elites. It’s long past time for the average American to have access to these savings options, and fiduciaries shouldn’t fear frivolous lawsuits when doing their best for their clients.

More regulatory reform is needed, such as avoiding overly burdensome liquidity requirements that might still effectively ban certain assets or investment trusts, but the current change from the Department of Labor is a huge step in the right direction for the average American.

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E.J. Antoni, Ph.D., is chief economist at the Heritage Foundation, where Nicole Huyer is a Senior Research Associate in the Thomas A. Roe Institute for Economic Policy Studies.

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