Why Active Matters: T. Rowe Price Retirement Funds vs. Passive Peers
January 2026
- Key Insights
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- We studied our Retirement Funds’ net-of-fees performance relative to passive competitors over 10-year rolling periods over the last 20 years through the most recent calendar year-end.
- We compared the performance of our Retirement Funds with composite indexes based on the performance of passive funds with comparable target dates.
- The composite indexes were based on the oldest share class offered by each competing passive target date fund. The results were equally weighted by fund.
When selecting a target date fund, defined contribution plan sponsors and individual investors can choose from both passively managed strategies—those that invest in an underlying basket of index funds—and actively managed strategies, which seek to enhance returns through security selection and/or tactical asset allocation moves to exploit potential short‑term market opportunities.
When considering active target date funds, investors may wonder if an active management approach justifies the higher management fees that such funds typically charge relative to their passive competitors.
To demonstrate that T. Rowe Price’s active management approach has created value for our clients, we examined the relative performance of our Retirement Funds (RFs). The focus of our study was on performance relative to the passive target date strategies offered by our competitors.1
| Rolling periods | Instead of just looking at the most recent 10‑year period, we measured performance over various rolling periods covering the past 20 years—or, for RFs without a full 20-year history, since the fund’s inception. Every calendar month marked the start of a new rolling period. |
|---|---|
| Active success rates | The active success rate records the percentage of times a fund beat its designated benchmark, net of fees and trading costs, over a specified time period (e.g., 10 years). Think of this as a measure of how often a client might look at his or her monthly statement and find that a fund has outperformed for that time period. |
| Excess returns | A measure of fund performance relative to a comparison benchmark, such as the passive competitor indexes used in this study. Excess return can be either positive or negative and typically is annualized over different time periods. The annualized return is what the investor could have earned if the rate of return during the period being measured had been maintained for one full year. |
Study methodology
To represent the passive alternatives to T. Rowe Price’s actively managed target date strategies, we used a series of composite performance indexes defined as passive; they were identified as having an “Active Passive Breakdown Percent Index Funds” of 75% or greater by Morningstar. These indexes included passive funds offered by major target date providers, such as The Vanguard Group, Fidelity Investments, BlackRock, Inc., and State Street Corporation.2
The comparison index for each T. Rowe Price RF included the passive funds in the Morningstar universe with the same target date as the RF. The returns on these indexes were based on an equally weighted average of the oldest share class offered by each competing passive fund.
Even for target date funds in the same category, there may be material differences among funds, including fees, expenses, and the portfolio mix of stocks, bonds, and other assets. Target date funds typically change their asset class allocations over time according to a predetermined glide path. Security selection within the underlying investments that make up those allocations can vary greatly between fund families and may have a material impact on fund performance.
RF relative performance was measured across rolling 10‑year periods (rolled monthly) over a 20-year window through year-end or since inception for RFs with shorter track records. Thus, the older the RF, the more rolling performance periods it had in each time frame studied.
Two performance measures were calculated for each RF:
- Active success rate: The percentage of total rolling periods in which the RF outperformed its passive competitor index. A positive success rate for a fund was defined as achieving a higher return than the relevant passive competitor index in more than 50% of all periods included in the study.
- Excess return: The return for each RF relative to its passive competitor index, averaged across all rolling performance periods in a given time frame.
To provide a high‑level summary of the relative effectiveness of T. Rowe Price’s target date process, we also calculated performance averages covering the RFs in the study. These averages were time weighted based on the percentage of the total rolling performance periods in each time frame provided by each RF.
Retirement Funds excluded from the study
One T. Rowe Price Retirement Fund—the Retirement 2005 Fund—was excluded from this study, as the fund had a limited number of passive peer constituents in the Morningstar universe. Another fund, the Retirement 2065 Fund, was excluded because it did not have any rolling 10-year performance periods as of year-end.
Our approach to active management
T. Rowe Price’s target date process seeks to improve outcomes for our target date clients at multiple levels—via glide path design, long‑term diversification, tactical asset allocation, and our active management approach. We believe the value added by our target date implementation can meaningfully enhance retirement outcomes for investors.
"We believe the value added by our target date implementation can meaningfully enhance retirement outcomes for investors."
Bottom‑up fundamental research is at the core of how we manage the underlying strategies in our target date funds. That means that our investment professionals go out in the field to uncover opportunities. They study them firsthand. And use those insights to help give our clients an investment edge.
Our target date managers—backed by our committee of asset allocation experts from across multi‑asset, equity, and fixed income—seek to get ahead of change by identifying attractive near‑term asset valuations and using prudent tactical allocation adjustments to take advantage of those potential opportunities.
Experience has been a critical component of our success as well. We’ve managed investments through all kinds of markets, and our portfolio managers average over 20 years of experience in the industry. Significantly, many of our analysts go on to become portfolio managers, which we believe creates a strong foundation on behalf of our clients.
Appendix
The relative performances of T. Rowe Price Retirement Funds (RFs) (Figure A1) were examined across 10‑year rolling periods (rolled monthly) over the last 20 years through year-end. Because inception dates—and, thus, fund longevities—differed, the number of rolling performance periods also varied for each RF.
Returns for each T. Rowe Price RF were compared with the returns on an equally weighted index of competing passive target date funds. This average was calculated based on the net asset value (NAV) performance of the oldest share class offered by each competing passive fund.
Retirement Funds included in this performance study
(Fig. A1)
| Fund | Inception Date |
|---|---|
| Retirement 2010 Fund | 9/30/2002 |
| Retirement 2015 Fund | 2/27/2004 |
| Retirement 2020 Fund | 9/30/2002 |
| Retirement 2025 Fund | 2/27/2004 |
| Retirement 2030 Fund | 9/30/2002 |
| Retirement 2035 Fund | 2/27/2004 |
| Retirement 2040 Fund | 9/30/2002 |
| Retirement 2045 Fund | 5/31/2005 |
| Retirement 2050 Fund | 12/29/2006 |
| Retirement 2055 Fund | 12/29/2006 |
| Retirement 2060 Fund | 6/23/2014 |
How the passive competitor indexes were constructed
The target date funds included in the competitor indexes were defined as passive; they were identified as having an “Active Passive Breakdown Percent Index Funds” of 75% or greater by Morningstar. Only funds that were open and available to investors as of year-end were included in the passive competitor indexes.
For each RF, an index was constructed of competing passive funds that shared the same target date. This index incorporated the oldest share classes offered by the competing funds, and the returns were equally weighted at the beginning of each performance period. For the corresponding Morningstar categories for each vintage, see Figure A2.
Morningstar target date categories (U.S. Funds)
(Fig. A2)
| Morningstar Category |
|---|
| Target-Date 2000–2010 |
| Target-Date 2015 |
| Target-Date 2020 |
| Target-Date 2025 |
| Target-Date 2030 |
| Target-Date 2035 |
| Target-Date 2040 |
| Target-Date 2045 |
| Target-Date 2050 |
| Target-Date 2055 |
| Target-Date 2060 |
Returns for the RFs and the passive competitors were based on daily NAVs and thus reflected the subtraction of management fees and other investment costs from both sets of funds.
Our competitor indexes included only those funds with the same target dates as the RFs in the study. Relatively few competing funds existed over some performance periods, particularly for older RFs.
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1 The performance of active target date funds reflects both the glide path mix and the value added or subtracted through security selection and/or tactical allocation. For more information on the T. Rowe Price funds used in this study, please visit troweprice.com.
2 More details on the study methodology can be found in the appendix.
Additional Disclosures
© 2026 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Important Information
Call 1‑800‑225‑5132 to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information you should read and consider carefully before investing.
All investments are subject to market risk, including the possible loss of principal. The principal value of the target date strategies is not guaranteed at any time, including, if applicable, at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65). Investments in other strategies: The strategies bear the risk that underlying strategies will fail to successfully employ their investment mandates. One or more underlying strategy’s underperformance or failure to meet its investment objective(s) as intended could cause the strategy to underperform similarly managed strategies. Interest rates: A rise in interest rates typically causes the price of a fixed rate debt instrument to fall and its yield to rise. Conversely, a decline in interest rates typically causes the price of a fixed rate debt instrument to rise and the yield to fall. International investing: Non-U.S. securities tend to be more volatile and have lower overall liquidity than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. Emerging markets: Investments in emerging market countries are subject to greater risk and overall volatility than investments in the U.S. and other developed markets. See the product offering documents for more detail on the principal risks.
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.
The views contained herein are those of the authors and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.
This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.
Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.
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