An annuity is guaranteed income for life.
Insurance companies sell annuities. The amount of the guaranteed income for life is based on the lump sum payment to the insurance company you provide at the time of contract, your age, and the options you have chosen. The insurance company calculates and contractually guarantees an income based on that amount plus current interest rates for the rest of your life.
Annuities are excellent retirement vehicles and can form all or part of your retirement planning, especially to help cover essential expenses in retirement.
People choose annuities because they can never run out of income – ever – for as long as they live. They can plan budgets around the income they expect. They do not have to worry about how their investments are performing. They have options whether to purchase a single life, joint life, inflation protection, guarantee period of income regardless of death, etc.