Best 401(k) Funds From Vanguard

Use our guide to the most popular actively managed offerings for retirement accounts.

By Nellie S. Huang

MORE THAN 100 MILLION

Americans invest through a workplace retirement savings plan, such as a 401(k). The bull market in stocks that ended its 11 year run in early 2020, only to resume in record time, has helped fatten many 401(k) account balances. On top of that, Americans are saving more. In 2019, they put 7.3% of their annual salary in 401(k) plans, up from 6.4% in 2018, not including any employer match, according to the most recent data available from the Plan Sponsor Council of America, a trade group that represents employers. When you add employer contributions, which average roughly 4% of annual pay, 401(k) investors are hitting at least the low end of the savings goal that many experts recommend—10% to 15% of your annual pay per year.

But how you invest your 401(k) savings can make a difference in your retirement readiness, too. If you had made a $10,000 investment a decade ago in Vanguard Primecap fund, for example, despite recent poor performance, it would be worth nearly $39,000 today. A similar investment in Vanguard Windsor, however, would be worth $26,900. More important, 401(k) investments should align appropriately with your time horizon and tolerance for risk, says Dave Stinnett, head of Vanguard’s strategic retirement consulting department, which helps plan sponsors design good 401(k) programs.

Every year, to help readers make good investment choices in their 401(k), we scrutinize the country’s 100 most-popular mutual funds in workplace retirement savings plans, a list that comes courtesy of BrightScope, a financial data firm that rates 401(k) plans.

In this article, the first of a four-part series, we analyze the most popular actively managed Vanguard funds in workplace plans. In the coming months, we will also feature the top retirement plan funds from Fidelity, T. Rowe Price and American Funds.

Vanguard comes first because this year, as in previous years, its funds dominate the list of popular 401(k) funds. A total of 33 of the firm’s funds rank among the nation’s 100 most-popular funds in these plans. (To see the full list, go to kiplinger.com/kpf/401kfunds.)

Of course, about half of the Vanguard funds that rank among the top 100 401(k) funds are index funds. We’re not analyzing those in this article because the decision to invest in low-cost, benchmark-tracking funds boils down to what kind of asset, broadly speaking, you want to add to your portfolio—small U.S. companies, say, or foreign stocks. And that choice is between you and your portfolio. Assessing the investment worthiness of an actively managed fund, however, is a different matter.