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Your 401(k) may have changed more than your paycheck did. AI-linked stocks have taken up more room inside popular retirement funds, while Washington considers letting private equity, crypto, and other alternative investments play a bigger role in workplace plans.
Balances are up after a strong quarter, but some of those gains came with heavier exposure to the stocks already leading the market. The next change could come from what retirement plans are allowed to offer.
Your index fund is an AI bet
An S&P 500 fund owns hundreds of companies, but five now account for roughly 30% of the index. Nvidia, Apple, Microsoft, Alphabet, and Amazon made up that share as of Wednesday’s close, according to Morningstar.
Plenty of workers own them without ever picking the stocks themselves. S&P 500 funds are common in 401(k)s, and target-date funds often put a large share of their US stock allocation into many of the same names.
The AI trade reaches further into a portfolio through chipmakers, data centers, utilities, industrial companies, and equipment suppliers. Marta Norton of Empower told CNBC that the infrastructure push touches many parts of the supply chain, spreading the same spending theme across several sectors.
Most retirement accounts still hold plenty outside AI, though the rally may have pushed some portfolios further toward large-cap stocks than investors intended. Rebalancing can bring that allocation back in line without trying to guess whether Nvidia or the broader AI trade has peaked.
The rally did the heavy lifting
Fidelity’s average 401(k) balance jumped 10.5% in the second quarter to a record $155.8K, marking its biggest quarterly increase since late 2020. Millennials did even better, with their average balance climbing 14.3% to $94.3K.
Baby boomers still had the largest average account at $283.2K, followed by Generation X at $240.7K and Gen Z at $20.8K. Millennials finished the quarter 26% above their average balance from a year earlier.
Workers did not suddenly start stuffing much more into their accounts. Employees and employers contributed an average 14.4% of pay, unchanged from the first quarter, with 9.6% coming from workers and 4.8% from employers.
Around 81.2% of participants contributed enough to collect their full employer match. Greg Black of Tencap told Newsweek that figures on access, participation, and contributions help fill in what a rising average balance misses.
The market supplied much of the quarter’s boost, which can quietly throw an allocation off course. A large-cap fund that outran everything else may now command more of the account, and owning several funds will not help much when their biggest holdings are the same.
Washington opens the 401(k) door
Retirement plans could soon have more than stocks and bonds to sort through. A Department of Labor proposal introduced in March 2026 would give fiduciaries process-based protections when evaluating funds that hold alternative assets.
Private equity, crypto, and similar investments would not automatically appear in 401(k)s. Employers would choose whether to offer them, with fiduciaries still responsible for deciding whether a fund makes sense for the plan.
The proposal has since landed in a different controversy. Lawmakers called for an immediate investigation after Bloomberg found nearly 12K supportive public comments that showed signs they may have been manufactured, including at least two reportedly submitted under the names of people who had died.
President Trump kicked off the policy push with an executive order in August 2025 directing regulators to revisit alternative investments in defined-contribution plans. Private markets, real estate, commodities, infrastructure, and actively managed vehicles investing in digital assets were all included.
Putting those assets into retirement funds brings a different set of homework. The Labor Department wants fiduciaries to consider fees, liquidity, benchmarks, valuation, performance, and complexity, especially important when an investment is difficult to price or sell quickly.
There could be a payoff for taking on that complexity. Georgetown’s Angela M. Antonelli cited modeling suggesting target-date funds with 15% to 20% in alternatives could increase projected retirement income by 6% to 8% after fees, although those returns are not guaranteed.
For now, workers do not need to wait for Washington to check under the hood. A roaring market has already changed the weight of some investments inside 401(k)s, and the balance at the top of the statement does not show how much the portfolio underneath it has moved.
