Income annuitization is the process of converting a lump sum of money—typically from retirement savings, an inheritance, or the accumulated value in a deferred annuity—into a stream of regular income payments. When you annuitize, you're essentially trading a pile of cash for a personal paycheck that can last for a set number of years or for the rest of your life.

Here's how it works: You transfer a specific amount of money to an insurance company, and in return, they guarantee to pay you a predetermined amount at regular intervals. The payment amount depends on several factors, including how much you're annuitizing, your age, current interest rates, whether you want payments to continue for your lifetime or for a specific period, and whether you want payments to continue to a spouse or beneficiary after your death.

The key consideration with annuitization is that it's typically an irreversible decision—once you annuitize, you generally can't access the lump sum anymore. This trade-off between liquidity and security is why many financial advisors suggest annuitizing only a portion of your retirement savings, keeping enough liquid assets available for emergencies, healthcare needs, or other opportunities that may arise.