A good way to boost retirement income.
The short answer is yes, an annuity can be a good way to safely get more income out of your retirement nest egg.
The concept is simple: You hand over a portion of your savings to an insurer and in return receive a fixed monthly payment no matter how long you live and regardless of how the financial markets perform.
Thus the annuity payment you receive includes not just investment gains and the return of your original principal, but these mortality credits as well.
You can't get mortality credits, or this extra source of income, from other investments; only an annuity that pools money from many investors can generate them.
You could, of course, try to match or exceed an annuity's payments by taking on more investing risk in an attempt to boost your return.
For that reason, it would make little sense to buy an annuity if you have good reason to believe you'll die before you reach life expectancy for someone your age (although an annuity could still make sense if you have a healthy spouse or partner who would like to collect guaranteed lifetime income after you're gone).
If Social Security provides enough income to meet all or nearly all of your basic living expenses, you may be able to forgo an annuity and just rely on withdrawals from your retirement savings as needed for emergencies and any extra expenses that may pop up.
To see how long your nest egg is likely to last given different withdrawal rates, you can go to this retirement income calculator.
Bottom line: Because an immediate annuity is an efficient way to turn a portion of your nest egg into guaranteed lifetime income, it can often play a role in a comprehensive retirement income plan.