Say I am 65 and want to retire and I have saved up $1 million over my lifetime. I also want to use this money up before I die because I have no heirs. Let's say the average life span of humans is 85 years. If I lived to be 85, I could use up $50,000 of my money per year (ignoring the fact that money earns interest) and exactly run out when I die. However, I don't know how long I'll live and so I'll spend my money more conservatively, and most likely die with a surplus of money.
Is there a retirement product where I give a company $1 million and they keep paying me, for example, $45,000 per year for as long as I live? This is beneficial for me because it takes away the stress of whether I will outlive my money. This is beneficial for the company because on average people my age will only live 20 years more, so the company gets an average profit of $100,000 (= $1 million - $45,000 x 20) per person.
Of course these numbers are arbitrary, but I wrote a concrete example to make things clear. So does a retirement product like this exist?