While investors can't expect a deal like former baseball star Bobby Bonilla, they can use an annuity to create a stream of income in retirement

Former Major League Baseball player Bobby Bonilla collects a $1,193,248.20 check from the New York Mets every July 1, and he'll continue to do so until 2035. The catch? He hasn't played for the team in 24 years.

Bonilla scored this deal in 2000, when the Mets still owed him $5.9 million. However, the all-star player agreed to defer his payment to let the Mets invest in the team and stadium. In return, the Mets agreed to pay Bonilla back $29.8 million over 35 years — one of the MLB's most famous deals ever.

In fact, ever since, July 1 has been known as Bobby Bonilla Day.

"For Bobby Bonilla, they've taken big lump sums of money [and] instead of giving [him] money up front, they'll convert that money into a future stream of income payments," said certified financial planner Louis Barajas, CEO of International Private Wealth Advisors in Irvine, California. Barajas is also a member of CNBC's Financial Advisor Council.

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While most investors can't expect a deal anything similar to Bonilla's, they do have access to a similar financial product called an annuity.

An annuity is a lump sum of money, often taken out of a retirement plan, which is converted into a future stream of income, or annuitized. Insurance companies guarantee payments for a set period that can span the rest of your life or beyond. Payments might begin immediately or be deferred.

The allure for investors is a guaranteed stream of income, much similar to Social Security or pensions. That can alleviate fears of running out of money in retirement.

How do insurance companies determine how much money they're going to give you? It's based on a couple of things, said Barajas. These include the rate of return they think they can earn on the money you give them, and your life expectancy, added Barajas.

Demand for annuities has soared this year amid concerns about the economy and lingering hints of a potential recession. Annuities struck a record sale of $310.6 billion in 2022, according to estimates released by Limra, an insurance trade group.

More than half, or 54%, of savers are considering a type of guaranteed lifetime income, according to a survey by Morning Consult for the American Council of Life Insurers.

Annuities are an investment product that have benefited from record-high interest rates — the higher the interest rate, the better the monthly rate you're going to get, Barajas said. Calculations are starting to change because companies have to figure out how to benefit the consumer and people are, on average, living longer, sometimes to age 95 or 100, he said.

"If you annuitize it, the company has to guarantee you that income," said Barajas. "Once it's annuitized, it's guaranteed for the rest of your life."

Annuities aren't for everyone, however. There are many different kinds, and some can be hard to understand or come with expensive terms and fees. There can also be restrictions and important but easily overlooked fine print, including terms that make it difficult or impossible to get your principal back if you change your mind.

Here are three ways to educate yourself before signing an annuity contract, Barajas said: