Hand over a lump sum, start collecting a guaranteed paycheck within about a year — for life, or for a set period.
The simplest annuity. You pay an insurer a single premium and, usually within 30 days to 12 months, they begin paying you a fixed income. It converts a pile of money into a paycheck you cannot outlive.
It is irrevocable and illiquid. In a life-only option, dying early means the insurer keeps the balance. You are buying longevity insurance, not an investment — and giving up all access to the money to get it.
A level monthly income. At recent (2026) rates a 65-year-old might receive roughly $600–$650/month per $100,000, life-only. Older buyers get more; guarantees for heirs get less.
No explicit fee — the insurer's costs and profit are baked into the payout rate. That opacity is the point to watch: you cannot see the margin, so you shop the payout, not the 'fee'.
Essentially none. Once issued, the decision is irrevocable and the lump sum is gone — there is no account to withdraw from.
If bought with non-qualified (after-tax) money, each payment is part tax-free return of principal (the exclusion ratio) and part taxable interest. If bought with qualified (pre-tax) money, the entire payment is taxable income.
Educational explainer, not individualized financial advice. Figures are typical industry ranges as of 2026 and vary by insurer, product, and state. Sources: SEC/FINRA investor bulletins, IRS Pub 575/939, NAIC model regulations, SECURE 2.0 Act. We’re independent and don’t sell annuities.