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A big part of retirement planning is setting up monthly income for the years after you leave work. Yet many 401(k) plans make this difficult by placing restrictions on how you take distributions. In some plans, if you want to withdraw anything at all you must take out every dime.

That is more than a mere inconvenience. You may have most of your retirement dollars in a 401(k) or similar plan. Restrictions on how you take out your money may prompt you to roll over all the funds into an IRA, where you are free to take out cash pretty much as you wish. That's not necessarily a bad move. But it may push you into higher-fee investments and leave you without certain valuable investment options—such as a stable-value fund, which is a cash equivalent with a relatively high yield that is generally not available outside a 401(k) plan.

In this way, inflexible distribution rules handcuff savers and may cost them dearly when it comes time to live off the money they have gathered. Even the government’s mighty Thrift Savings Plan (TSP), which will welcome the military with new incentives next year, leaves participants with painfully few options for taking their money out.

Earlier this month, lawmakers called attention to inflexible distribution rules with a proposal to loosen restrictions on the widely used federal government plan, which has assets of $482 billion. Senators Rob Portman, R-Ohio, and Tom Carper, D-Del., introduced the TSP Modernization Act, which would change distribution rules for the first time since the TSP was established in 1986.

Currently, federal employees can take only one partial distribution while they are employed and meet age requirements. Any follow-up distribution after they leave government employment must be for the full balance. Those who have left the federal payroll and meet age requirements and haven’t yet taken a distribution can take one partial distribution. After that, they must move to full distribution options.

The proposal would allow for multiple partial distributions while workers are employed by the government and more again after retiring or leaving government service. The idea is to keep more government workers in the TSP, which has some of the lowest fees of any retirement plan. TSP participants move $9 billion a year into other plans that almost always have higher fees. More than a quarter of those moving the funds say they do it for greater flexibility.

In the private sector, a shift toward more flexible withdrawal rules is one of the encouraging ways that 401(k)s are changing to help retirement savers. Making it easier for workers to keep the money in a 401(k) can benefit the employer as well as workers: Companies are concerned that if plan assets shrink, they may have less leverage to negotiate lower fees with investment managers, theWall Street Journal reported last year.

Larger 401(k) plans tend to have lower fees and fewer restrictions on distributions. But that isn’t true across the board. Some charge higher fees than you would pay in an IRA stocked with low-cost index funds. And only 61% of large plans allow people to take monthly distributions, according to Aon Hewitt.

Small-employer 401(k) plans tend to charge the highest fees and be the least flexible. So for those in such a plan, a full rollover to an IRA may make sense in any event.

The good news for retirement savers is that the proposal to loosen distribution rules from the massive government TSP has momentum, and it may lead more private-industry plan sponsors to follow suit. For now, though, you will have to navigate on your own. A rollover to an IRA makes the most sense if you can get into lower fee investments, like index funds. If you cannot lower your costs, consider keeping your money in an employer-sponsored plan as long as possible—and hope for distribution reforms sooner rather than later.