Vanguard and Fidelity have created a new type of mutual fund that ensures retirees won't outlive their savings.

Dubbed income-replacement funds, their professional managers invest in just the right mix of stocks and bonds to generate a long-term monthly income for each participant.

One of Fidelity's 11 new income replacement funds, for example, is designed to stretch savings out over 30 years with just over a 5% annual payout and an expense ratio of 0.65%. The idea is to take the burden of making those investment decisions off the backs of retirees.

The buy-it-and-forget-about-it approach is very similar to target-date funds for active workers. Their managers steadily shift money stocks to bonds as investors near retirement to maximize and protect their savings.

Of course nothing is guaranteed. If the stock markets hit a long-term slump your money might not last as long as intended.

But these funds offer a promising alternative to annuities, which are a much more complex and expensive way to stretch your savings out.