The Best T. Rowe Price Funds for 401(k) Retirement Savers

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published 4 November 2021

T. Rowe Price's corporate symbol is the bighorn sheep: a sure-footed and agile climber, even in the roughest terrain. It was chosen to reflect investors' ability to rely on the firm's investment expertise to navigate all types of markets.

As far as the best T. Rowe Price funds are concerned, it's an accurate representation.

In this, part of our annual review of popular workplace retirement funds, we put T. Rowe Price's most widely held 401(k) funds to the test. We analyze five of Price's funds, plus the target-date series T. Rowe Price Retirement, and rate them Buy, Sell or Hold. (Seven Retirement target-date funds appear among the most widely held 401(k) funds in the country – with target years between 2020 and 2050 – but we appraise the series as a whole.)

Disclaimer

Returns and data are as of Nov. 2. In each review, we refer to the symbol, returns and expense ratio of the share class that is available to most investors. The reason for this is that the share classes of specific funds offered in 401(k) plans can vary, depending in part on the size of the plan.

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T. Rowe Price Blue Chip Growth: HOLD

Symbol: TRBCX
Expense ratio: 0.68%
1-year return: 31.4%
3-year annualized return: 25.4%
5-year annualized return: 24.8%
10-year annualized return: 19.3%
Rank among the top 401(k) funds: #20
Best for: Long-term growth, but a new manager has us pushing the pause button

That's some evidence that Greene has the chops to run Blue Chip Growth. But the transition between managers can be tricky. Even though Greene will manage to TRBCX's objective – to invest in stocks of large, established companies with above-average growth potential – his buying and selling decisions will vary from Puglia's, for better or for worse. He might want to shift the portfolio he inherited a bit, too.

On top of that, Price recently filed to have TRBCX reclassified as non-diversified, from diversified, with the Securities & Exchange Commission. That allows Greene to invest a greater portion of the fund's assets in fewer issuers, and it could kick up the fund's volatility a bit. So, while we're cautiously optimistic that Greene will do well as the new manager at Blue Chip Growth, we have a Hold on the fund for now as we wait and see what he does and how it affects the fund's performance.

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T. Rowe Price Growth Stock: BUY

Symbol: PRGFX
Expense ratio: 0.64%
1-year return: 36.8%
3-year annualized return: 26.5%
5-year annualized return: 24.4%
10-year annualized return: 18.9%
Rank among the top 401(k) funds: #48
Best for: Investors looking for extra exposure to large, fast-growing companies

PRGFX is a decent choice for investors looking for a good growth fund. Manager Joe Fath likes to invest in companies that feature one or more of the following characteristics: industry leadership in a lucrative part of the economy, superior growth in earnings and cash flow, an ability to sustain or expand earnings momentum even during tough economic times. The traits typically lead Fath to concentrate on four sectors: information technology, consumer discretionary, communications services and healthcare.

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T. Rowe Price Large-Cap Growth I: BUY

Symbol: TRLGX
Expense ratio: 0.56%
1-year return: 38.1%
3-year annualized return: 27.2%
5-year annualized return: 27.1%
10-year annualized return: 20.3%
Rank among the top 401(k) funds: #46
Best for: Aggressive investors looking for above-average returns

Tamaddon, like almost every other U.S. growth stock fund manager, holds the usual suspects at the top of his portfolio. but he takes sizeable bets. Alphabet, Microsoft and Amazon.com, at last report, were the top three holdings and represented nearly 27% of the fund's assets. Those three stocks have been big contributors to TRLGX's recent performance. Over the past 12 months, the fund has gained 38.1%.

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T. Rowe Price Mid-Cap Growth: BUY

Symbol: RPMGX
Expense ratio: 0.73%
1-year return: 31.5%
3-year annualized return: 20.6%
5-year annualized return: 19.6%
10-year annualized return: 16.2%
Rank among the top 401(k) funds: #50
Best for: Investors looking for long-term growth

For close to three decades, manager Brian Berghuis has run T. Rowe Price Mid-Cap Growth (it will be 30 years in June 2022), delivering a 14.3% annualized return over the period. No other diversified U.S. stock fund manager in the country has done better – for as long. Although three other diversified U.S. stock funds sport slightly higher annualized returns over that period, none were earned by the same manager over the entire period.

Now the only question is how much longer Berghuis, who just entered his 60s, will stick around. He has not announced any plans to retire. That's good news. But Mid-Cap Growth has taken on associate managers, which at T. Rowe Price is sometimes a signal (albeit a distant one) that a manager transition is in the works. The firm prefers to make changes slowly, and adding associate managers to a fund a year in advance of a manager change is not uncommon.

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T. Rowe Price New Horizons: BUY

Symbol: PRNHX
Expense ratio: 0.75%
1-year return: 38.7%
3-year annualized return: 33.0%
5-year annualized return: 31.0%
10-year annualized return: 22.1%
Rank among the top 401(k) funds: #66
Best for: Aggressive minded investors with a long-term view looking for exposure to small and midsize companies

T. Rowe Price New Horizons has entered a new chapter with manager Joshua Spencer, who stepped in after superstar Henry Ellenbogen abruptly left T. Rowe Price in April 2019. So far, it's been thrilling. Since Spencer took over, he's pounded the competition with a 35.2% annualized return, beating 94% of its peers, funds that invest in midsize, growing companies, and far and away ahead of the 20.4% annualized gain in the Russell Midcap Index.

But Spencer has made his mark on PRNHX. Like Ellenbogen, he looks for small, undiscovered emerging companies that offer the potential for accelerated earnings growth because of new products, a revitalized management team, or a structural shift in the economy. Investments in private companies – including shoemaker Allbirds (BIRD), which only very recently went public; apparel company Rent the Runway; and Tempus Labs, a biotech firm – represent 5% of the fund's assets and offer the promise of enhanced returns.

Although Spencer focuses on companies with $7 billion or less in market value at the time of purchase, like his predecessor, he'll hang on as long as the company is growing. It's one reason New Horizons, which started under Ellenbogen as a small-company growth fund, is now classified a mid-cap growth fund. Most of the fund's top 10 holdings predate Spencer as manager. Veeva Systems (VEEV), a cloud-computing company, for instance, has been in the fund since 2017 and boasts a market value of $45 billion.

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T. Rowe Price Retirement Target-Date Series: BUY

Rank among the top 401(k) funds: #27 (TRRCX, 2030); #41 (TRRDX, 2040); #45 (TRRHX, 2025); #49 (TR, 2020); #53 (TRRJX, 2035); #69 (TRRKX, 2045); #72 (TRRMX, 2050)
Best for: Investors who want a managed, diversified approach to their retirement savings

The key to a top-notch target-date fund is the asset-allocation plan behind it. And for the past decade, T. Rowe Price has had a winning one. The proof is in the long-term performance record of the funds in this target-date series, which is the third biggest in the country after Vanguard and Fidelity. Over the past three, five and 10 years, T. Rowe Price Retirement target-date funds have posted returns that rank among the top decile of their respective peer group.

The "Retirement" series is Price's flagship target-date product. The firm has since launched other target-date products. One, called "Target," is slightly more conservative than its older sibling Retirement. While Retirement holds 55% of its assets in stock at retirement, Target holds 42.5%. And earlier this year, Price introduced the "Retirement Blend" series, which relies on a mix of active and passive funds.

But the firm's Retirement target-date funds dominate the 401(k) world. The funds hold 24 to 26 mostly actively managed mutual funds, depending on the target year. The most popular one, T. Rowe Price Retirement 2030, holds 26 funds, including some of the stellar portfolios we highlighted here, such as New Horizons and Mid-Cap Growth, as well as one index fund, T. Rowe Price Equity Index 500 (PREIX).

The asset allocation team, headed by Wyatt Lee, frequently makes adjustments to the target-series glidepath or to the fund lineup. In the first half of 2020, for instance, the team initiated a glide path tweak that raised the overall stock allocation and lowered the bond allocation at certain points along the glide path. Like all changes at Price, the shifts will be made slowly and won't be completed until mid-2022. Ultimately, the stock allocation at the beginning of the glide path – with 40 years before retirement – will increase to 98% from 90%. And at the glide path's end – 30 years after retirement – the stock holdings will sit at 30%, up from 20%.

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Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.