Flex IRAs: The Retirement Hack You Need to Know

Let’s talk retirement. Whether you’re just starting your career or well into it, planning for your future can feel overwhelming. Between 401(k)s, traditional IRAs, and Roth IRAs, the options can be confusing. But there’s one retirement tool you may not have heard much about: the Flex IRA.

“Many people start thinking about their retirement savings during the spring when the deadline to contribute starts to loom,” said Matt Knighton, Vice President and Branch Manager/Lender for the First Federal Bank of LA Sulphur branch. “Flex IRAs offer a unique combination of tax benefits and flexibility – it’s even in the name – which make them a great option for many people.”

What is a Flex IRA?

A Flex IRA (short for Flexible IRA) isn’t a specific type of IRA but rather a strategy that combines the best features of traditional and Roth IRAs with the ability to adjust contributions based on your financial situation. While you can’t combine traditional and Roth contributions into one account, the Flex IRA still allows you to:

Adjust contributions based on life changes. “Maybe you got a raise, or maybe you’re starting a business and need to scale back for a bit,” added Knighton. “Flex IRAs allow you to adjust contributions based on what works for you.” You don’t have to worry about a setting a contribution amount in stone each year. You can instead adjust your contributions with ease.

Withdraw funds strategically. With careful planning, you can take advantage of different tax treatments when withdrawing funds in retirement. Some Flex IRA options allow penalty-free withdrawals for specific life events, like buying a home or medical emergencies.

Why Choose a Flex IRA?

“Retirement planning isn’t about picking one perfect solution for your future,” said Knighton. “It’s about setting yourself up with options, and the Flex IRA does just that.”

With traditional IRAs, you get a tax break now but pay taxes later. With Roth IRAs, you pay taxes now but withdraw tax-free later. A Flex allows your contributions to be flexible based on your current tax situation and future expectations. If you’re in a higher tax bracket now, you might favor traditional contributions. If you expect to be in a higher bracket later, Roth contributions could be smarter.

Let’s be real; life happens. “One year, you might be able to max out your contributions, and the next, you might need extra cash for an unexpected expense,” commented Knighton. “A Flex IRA allows you to scale your contributions up or down based on your financial situation.”

While retirement accounts are designed for the long haul, some Flex IRA options allow penalty-free withdrawals for first-time home purchases, education expenses, or medical emergencies.

How to Set Up a Flex IRA

Find the right partner. Not all banks or financial firms offer the same options. Look for one that offers both traditional and Roth IRAs with flexible contribution structures.

Decide on your contributions. Work with a financial advisor to figure out the best mix of traditional and Roth contributions based on your income and tax situation.

Set Up Automatic Contributions. Even small, consistent contributions add up over time.

Review, review, review. Keep an eye on your contributions so you can stay on track for your goals.

Ready to learn more? Call an Account Deposit Specialist at the First Federal Bank of LA Sulphur Branch at 337-625-5388 or drop by any local First Federal Bank of LA branch. Consult your tax advisor.