In such a case, a retiree withdraws all of the money he/she has saved during working life in, for example, an Individual Retirement Account (IRA), and uses some or all of the money to buy an annuity whose payments will replace the retiree's wage payments for the rest of his/her life.
When someone retires, they may choose to liquidate their savings stored in an IRA and utilize a portion or all of those funds to acquire an annuity that will serve as a steady income source for the rest of their life.