How to turn assets in your 401(k) into income

Q: I plan to retire in about one year. I have only my 401(k) with my company and Social Security, which I will start to collect at 65 when I retire. I cannot live on my Social Security, however, and will need some income from my 401(k). I've had people tell me to open up an account with a discount brokerage and manage it myself. But I'm afraid I would have nothing left if I do that; I don't know how to choose the correct investments.

My questions: How does one get a monthly income if I leave my money in my former employer's 401(k)? I am really at a loss as to what to do to make the most of the savings I have. I am concerned about fees for monthly payouts and the like and need to figure this out. I read so much about saving, but haven't read anything or not much about what and how this would work. Surely there must be others who will need a monthly payout from their savings? I have started to read about fees charged on investment accounts and I am now concerned I will not have enough saved. Unfortunately, I cannot keep working in my current job after 2016. Can you please provide me some articles/books and resources that might be of some help? Margaret Stuart, Litchfield Park, Ariz.

A: You're not alone in your quest to learn how to turn the assets in your 401(k) into income to support, along with Social Security, your desired lifestyle in retirement. Millions upon millions of Americans are struggling with this very question today. So, let's start with some books, resources and websites that could be of help to you (and others).

Among the books that experts I queried and I like are the following:

•Risk Less and Prosper: Your Guide to Safer Investing by Zvi Bodie and Rachelle Taqqu

•Pensionize Your Nest Egg: How to Use Product Allocation to Create a Guaranteed Income for Life by Moshe Milevsky and Alexandra Macqueen

•Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck by Steve Vernon

•The AARP Retirement Survival Guide by Julie Jason

•The Bogleheads' Guide to Retirement Planning by Taylor Larimore

•Spend 'Til the End: Raising Your Living Standard in Today's Economy and When You Retire by Laurence Kotlikoff and Scott Burns.

Read those books and you should become more comfortable and familiar with the process of turning your assets into a stream of income that ought to last over the course of your lifetime.

Here's a list, though not exhaustive, of websites that offer retirement-related content: Kiplinger; Money; MarketWatch; USA TODAY (of course); U.S. News and World Report; moneyover55.about.com, which features a blog about 10 retirement blogs worth reading; and obliviousinvestor.com.

Also check out the Society of Actuaries' website about retirement. Besides investing, you'll need to learn more about the risks you could face in retirement. Plus, you should invest some time in learning how to maximize your Social Security benefits. AARP has a calculator that can show you how to do that (go to aarp.org and search for Social Security benefits calculator).

Many financial firms also have websites that help you get up to speed on turning assets into income. Some of them include Fidelity, T. Rowe Price and Vanguard.

Lastly, you should probably talk to, and maybe even retain, a qualified and competent adviser who specializes in creating retirement-income plans. This won't be as easy as it sounds because many advisers are good at helping people save for retirement and not so good at helping them figure out how to turn assets into income. And much of the advice you get will depend on the adviser's business model, education and training, how they are regulated and the like. Some advisers will prefer using systematic withdrawal plans, while others might prefer using income annuities to turn assets into income. Read a column I wrote a couple years ago that contains questions to ask an adviser before hiring them to build your retirement-income plan.

Also, consider using a fee-only adviser who charges by the hour. You can find such advisers at NAPFA.org and The Garrett Planning Network (garrettplanningnetwork.com).

Q: I left my retirement money in my former employer's 401(k) plan. And now the plan provider is hounding me to transfer the money to an IRA. I'm only 61 and don't see why I would do that. What am I missing? Steve Paxman, Westfield, Mass.

A: It is possible that you're not missing anything, says Denise Appleby, the CEO of Appleby Retirement Consulting in Grayson, Ga.

IRA rollovers are a big — as in $300 billion — deal in the industry today. And many firms are competing to capture IRA rollovers. After all, assets under management equals revenues and profits. So, odds are, your plan provider is doing nothing more than making sure that — if and when the time comes — you roll over your 401(k) to an IRA with them rather than another firm. "This way, they would still remain the custodian for your assets," said Appleby.

Another reason: It's possible that the terms of your 401(k) plan require former employees to move their balance out of the 401(k). "If that's the case, you should be provided with a written explanation of such," says Appleby. "Of course, the only way to determine their reason for the plan provider wanting you to rollover your 401(k) account to an IRA is to ask them."

Regardless of the reasons provided, it's important that, if and when you decide to do an IRA rollover, the end results are consistent with your objectives.

To that end, Appleby says the following are some of the factors that should be considered before moving funds from a 401(k) to an IRA: investment options, taxes and creditor protection.

Here's what Appleby had to say about those factors:

•Investment options. Talk to your financial adviser about your investment needs. Your financial adviser can help you to determine if the investment options in your 401(k) are ideal for you. If such is the case, he or she should be able to help you identify comparable options for your IRA. Alternatively, he/she can help you do design an investment portfolio that is suitable for your investment profile.

•Check to determine if you will be losing any tax benefits as a result of the rollover.These benefits include favorable tax treatment for distributions of employer stocks with net unrealized appreciation (NUA). If you do have employer stock in your 401(k) account, discuss this benefit with your financial adviser and tax professional before you do a rollover.

•Asset protection. If creditor protection is an issue, consider whether a rollover would mean less protection. While the rollover to your IRA would have unlimited bankruptcy protection, that may not be the case for your beneficiaries who inherit your IRA. Further, while 401(k) assets are usually protected from creditor claims — except for IRS levies — the level of protection for IRA assets is determined by state law.

"These factors are, to be fair, very high level; and are just a few of the factors that should be considered," says Appleby. "The bottom line is, unless the terms of the 401(k) require that you withdraw your balance, the decision to roll over the amount to an IRA should be yours, as you are accountable for the consequences, whether negative or positive."

Ultimately, it's a good idea, says Appleby, to talk to a financial adviser who is proficient in the area of rollovers, IRAs and 401(k)s in general. "Ideally, such an adviser can help you to make an educated decision, which is consistent with your goals and objectives," she says.

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch and teaches at Boston University.Got questions about money? Emailrpowell@allthingsretirement.com.