Basically you pay an insurance company a sum of money.

Then at some point (age 65 say) they send you money each month for life.

They charge a fee for this of course.

Advantage: You are guaranteed to get the payment for life.

Disadvantage: The fee can be huge. The payment will not keep up with inflation. Your heirs get nothing. And if you die before age 65 you get nothing. (There are plans which cover both husband and wife.)

You are describing only one flavor of annuity - a single premium fixed annuity.

There are a great many flavors of annuity, most of which are specifically designed to address one or more of your disadvantages.

However, I've never seen one that addresses the fees. I suppose some of them have fees that are simply "large" rather than "huge."

--Peter <== who would recommend an index and/or bond fund before an annuity about 99% of the time. Maybe closer to 99.99%.