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Financial Flexibility

January 24, 2021

The virus pandemic that started in March 2020 quickly ushered in lockdowns, business closures and massive job loss that no one could see coming.  A key lesson for all of us is the importance of financial flexibility. 

Just as a gymnast is flexible, her abilities didn’t happen overnight.  It takes hard work, dedication, persistence, and sacrifice.  These are also the required traits of those working towards financial flexibility.

So what does being financially flexible mean?

Starting out, it means setting a goal of becoming financially independent as soon as possible. Independence comes from avoiding debt.  Independence means doing everything possible to reduce/avoid student loans, or at least by pursuing a college degree or a trade that can be put to work in the chosen field quickly.  Independence means establishing an emergency savings of at least 3 months (6 to 9 is preferred) to be able to weather an unexpected expense, job loss, or pandemic.  Part of this process is understanding where your money goes each month through actively budgeting. 

When it comes time to buy a home, being financially flexible means understanding your budget and spending within your means. Just because the mortgage lender says you can, buying too much house most times is not a sound financial decision.

Building in financial flexibility in your life means taking advantage of “free money” by saving at least up to your employer’s match within the company sponsored retirement plan.  It’s free money the company’s willing to give you if you just do your part.

Flexibility means saving in a Roth IRA, if eligible to do so, to take advantage of the many flexible features of a Roth including tax free growth, tax free withdrawal of deposits at any time (earnings are still taxed), and completely tax free withdrawals after age 59 ½ and after the Roth has been open for 5 years.

It means saving tax-efficiently in non-retirement accounts for even greater flexibility in the future.

Financial flexibility means having proper insurance coverages if something were to happen.  This includes life insurance, disability income insurance, home, auto, liability insurance, and long term care insurance.

Again, to have more flexibility now and in the future, this requires hard work, dedication to the process, and sacrificing current wants.

Taking these steps can bring you to a retirement that can be more efficiently planned for because financial flexibility has been considered for several years prior.  Here’s how: 

Tax planning:  When withdrawals are needed in retirement, the value of the ability to choose the account to pull from cannot be understated.  At withdrawal, you have accounts that are always taxable (401k/403b/TSA/457/TSP/Traditional IRA), sometimes taxable (non-retirement accounts), and never taxable (Roth IRAs where qualifying conditions are met). Planning the efficient taxation of withdrawals over a 25+ year retirement can easily lead to thousands of dollars of savings. 

Income planning:  Because flexibility was planned for, income planning becomes more flexible as well with multiple sources of investment savings.  Accounts can be positioned to take advantage of their specific features in order to maximize the efficiency of every dollar in the plan.

Estate planning:  In December 2019, the SECURE Act greatly changed the rules that govern retirement accounts for non-spouse beneficiaries.  This can be a whole separate blog post, but now more than ever, it is important to have financial flexibility across your assets when estate planning is a priority (and you don’t need millions to make an estate plan).  Having an efficient estate plan that can include accurate beneficiary designations, proper use of trusts, and asset location, asset protection, asset preservation, and transfer strategies, is not possible without prior planning that considers financial flexibility.

If you’re unsure of your own preparation, or have never formally planned for yourself, your family, or your future, give me a call at 716-698-8196 or email me at


For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Investment Services LLC nor any of its representatives may give legal or tax advice. 

To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.