How Much Is Investor Autonomy Worth?


  • Shlomo Benartzi,

  • Richard H. Thaler

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    • Benartzi is from the Anderson School at UCLA and Thaler is from the University of Chicago. We would like to thank Jeff Maggioncalda, Jason Scott, Bill Sharpe, and Len Sheppard, among others at Financial Engines, for making their products available for our research. Detailed information on Financial Engines is available at We would also like to thank Michael Falk CFA, Carl Londe, and Tony Sabos of ProManage, Inc. (formerly, Strategic Financial Concepts, Inc.) for providing us access to the ProManage PROgram™. Information about ProManage is available at In addition, we are grateful to Tom Koelbl of SwedishAmerican Health System for letting us conduct surveys at SwedishAmerican Health Systems. We would like to thank Terry Odean, our AFA discussant, for helpful comments. All errors are our own.


There is a worldwide trend towards defined contribution savings plans, where investors are often able to select their own portfolios. How much is this freedom of choice worth? We present retirement investors with information about the distribution of outcomes they could expect to obtain from the portfolios they picked for themselves, and the same information for the median portfolio selected by their peers. A majority of our survey participants actually prefer the median portfolio to the one they picked for themselves. We investigate various explanations for these findings and offer some evidence that the results are partly attributable to the fact that investors do not have well-defined preferences.