I can't remember what post I read this in (but it was on Hacker News) and I read when designing Claude Code, they (Anthropic) tried a RAG approach but it didn't work very well compared to loading in the full file. If my understanding of how Claude Code works is correct (this was based on comments from others), was it "greps like a intern/junior developer". So what Claude Code does (provided grep is the key), is it would ask Sonnet for keywords to grep for based on the users query. And it would continuously revise the grep key words until it was satisfied with the files that it found.
As ridiculous as this sounds, this approach is not horrible, albeit very inefficient. For my approach, I focus on capturing intent which is what grep can't match. And for RAG, if the code is not chunked correctly and/or if the code is just badly organized, you may miss the true intent for the code.