eng Science and Education Publishing Journal of Finance and Economics 2328-7276 2018-08-06 6 4 125 133 10.12691/jfe-6-4-2 JFE2018642 article Dong-Hwa Lee 1 Jun-Hee An 1 Joo-Ho Sung jhsung@khu.ac.kr 1 Department of Business, School of Management, Kyung Hee University Many assume that for retirees, purchasing an annuity is a better option than self-annuitization in the decumulation period. In Korea, retirees have shown a strong preference for properties (real estate), and a decision to annuitize has been extremely rare. Using a genetic algorithm, we show that self-annuitization can be recommended as an optimal choice for retirees in Korea if they consider properties as one of the investment options. We set three scenarios that a worker can choose at retirement: self-annuitization, purchasing a whole life annuity, and mixed strategy. We then calculate an optimal asset allocation for each scenario capable of minimizing probability of consumption shortfall (PCS). An important observation is achieved: the optimal asset allocation for minimizing PCS vary by the income quintiles, and PCS rises significantly as the preference for purchasing a whole-life annuity increases. In case of a large reduction in consumption after retirement, however, annuitization may be a better option for retirees in the lowest income quintile. http://pubs.sciepub.com/jfe/6/4/2/jfe-6-4-2.pdf annuity puzzle self-annuitization annuitization probability of consumption shortfall optimal asset allocation