Why investment flexibility is becoming an increasingly important consideration in retirement plan design

Alternative investments are attracting more attention in the defined contribution retirement market. However, despite growing industry interest, their adoption in 401(k) plans remains relatively limited.

According to Morgan Stanley’s 2026 Retirement Plan Survey, released in October, only 15% of surveyed plan sponsors currently offer alternative investments in their 401(k) investment lineups. The survey gathered responses from 200 retirement plan sponsors between July and August 2026, representing organizations with at least $50 million in defined contribution plan assets. The findings suggest that while alternative investments are increasingly part of the conversation, they have yet to become a mainstream component of most workplace retirement plans.

This limited adoption reflects the considerations involved in expanding a retirement plan's investment lineup. Plan sponsors must evaluate more than the potential benefits of additional asset classes. Fiduciary responsibilities, investment costs, complexity and whether participants can understand and appropriately use the available options all matter. Morgan Stanley's findings also indicate that alternatives are most commonly incorporated into target-date funds or managed account solutions among plans that offer them, rather than being left entirely to individual participants to select.

The broader question for plan sponsors is not whether every 401(k) should include alternative investments. Rather, it is whether their retirement plan has the flexibility to accommodate different investment approaches when they are appropriate for the plan and its participants. A well-designed investment lineup should reflect the workforce's needs, the plan's objectives and the responsibilities involved in overseeing retirement assets.

This is where an open-architecture platform can offer greater flexibility. RetireBetter's open-architecture investment platform provides access to investments from a wide range of providers, including alternative assets. These may include private placements, real estate and other alternative investment options. This flexibility allows plans and their advisers to consider a broader range of investment opportunities, subject to their own investment review and suitability considerations.

RetireBetter combines this investment flexibility with retirement plan services covering 401(k), 403(b), 457(b) and Cash Balance plans, alongside plan administration and recordkeeping support. Its technology platform and professional service team support plan operations while helping clients access investment options that align with their specific requirements.

As the retirement industry continues to evolve, investment flexibility should go hand in hand with thoughtful plan design and responsible oversight. Alternative investments may not be suitable for every plan or participant, but having the ability to consider a broader range of options can be an important part of building a retirement platform that adapts to changing needs.