Combining 401Ks

[BillCarson]

Looking for some advice/insight on combining my 401K accounts.  Wife and I are 56 looking to likely retire next year.  We are in good shape financially and have very little debt (small house payment at good interest rate).  I have three 401K accounts and she has one.  We also have after tax accounts that we will likely use first but may do some Roth conversions.  I am aware of the Rule of 55 but probably wont use it on my accounts.   

I'm considering combining my three accounts into one just to make tracking and management easier.  Here are some details of the three accounts:

401K #1 – This has the lions share of my tax deferred dollars in it.  I contributed to it significantly for over 25 years and its from when I worked for a large company. Its investment choices are somewhat limited and are customized (i.e they are not Fidelity, Vanguard, etc.) but they do have the standard choices that follow certain indexes etc. (SP500, Large Cap, Small Cap, Bonds, etc).  I am not eligible to use Rule of 55 on this account (left the company when I was 54.

401K #2 – This has a small amount in it compared to #1.  It from a small start up company that I worked at for about a year.  Its investment choices are more diverse than the other two and incudes a good selection of Fidelity funds.  I am eligible for the Rule of 55 on this one but must take the entire amount out if I choose that route.

401K #3 – This has a small amount in it compared to #1.  Its with my current employer which is a large stable company similar to 401K #1.  Its investment choices are structured similar to 401K #1 (no actual Fidelity, Vanguard, etc. choices).  This account is eligible for the Rule of 55 and allows partial distributions of any amount.

From and investment choice perspective, 401K #2 seems better than the other two however its associated with that small start up company.  If I chose to roll the other two accounts into this one, should I be concerned that is associated with a small company?  If that company were to cease to exist (possibly go bankrupt, etc.) would there be any impact to its Fidelity managed 401K accounts?   

Is there any other strategic approach I should consider regarding combining (or not combining) these accounts?

Should I just leave them alone and not worry about it?

Thanks in advance!
 

[McStache]

My understanding is that typically you can roll old 401ks into your current active 401k, but once you've left, that's no longer an option. So you could roll #1 and #2 into #3 or you could roll any/all into an IRA. Check your plan documentation to be sure.

If you roll the old 401ks into your current one, would the total balance be eligible under rule of 55? That seems like it would be advantageous

[secondcor521]

I think it's unlikely that 401(k) #2 would accept incoming rollovers from a former employee.

I also think it's unlikely that 401(k) #3 would allow you to rollover while you're a current employee.

Unless you (a) live in a state where 401(k)'s offer better protection than IRAs and (b) you value that protection, I would just roll all three 401(k)s into a single IRA at Fidelity / Vanguard / Schwab when you retire from #3.  You'll have one account instead of three, all the investment choices you can handle, and the account fees will likely be zero.  You could roll your wife's 401(k) to her own IRA at the same place and probably set it up so you can see each other's account.

[secondcor521]

If you roll the old 401ks into your current one, would the total balance be eligible under rule of 55? That seems like it would be advantageous

Yes, it would.

[lhamo]

You only have 2-3 years you need to cover before age 59.5 when all the 401k money will be accessible to you.  How large is your brokerage account?  Is it enough to cover your planned spending + any likely emergencies?  If so, then I would probably roll all of account #1 into account #2 since that is the one that has more flexibility with investments and where you probably want to keep things longer term.

If the brokerage account is not sufficient to meet your 2-3 year cashflow needs, then I would probably roll enough of account #1 into account #3 to cover those costs, since you can take Rule of 55 withdrawals from that one and it gives you more flexibility with cash flow.  Put the rest into account #2.  Then after you hit age 59.5 you can consolidate everything into account #2 -- or just roll everything into an IRA.