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Regularized Auto-Encoders (RAEs) form a rich class of neural generative models. They effectively model the joint-distribution between the data and the latent space using an Encoder-Decoder combination, with regularization imposed in terms of a prior over the latent space. Despite their advantages, such as stability in training, the performance of AE based models has not reached the superior standards as that of the other generative models such as Generative Adversarial Networks (GANs). Motivated by this, we examine the effect of the latent prior on the generation quality of deterministic AE models in this paper. Specifically, we consider the class of RAEs with deterministic Encoder-Decoder pairs, Wasserstein Auto-Encoders (WAE), and show that having a fixed prior distribution, \textit{a priori}, oblivious to the dimensionality of the `true' latent space, will lead to the infeasibility of the optimization problem considered. Further, we show that, in the finite data regime, despite knowing the correct latent dimensionality, there exists a bias-variance trade-off with any arbitrary prior imposition. As a remedy to both the issues mentioned above, we introduce an additional state space in the form of flexibly learnable latent priors, in the optimization objective of the WAEs. We implicitly learn the distribution of the latent prior jointly with the AE training, which not only makes the learning objective feasible but also facilitates operation on different points of the bias-variance curve. We show the efficacy of our model, called FlexAE, through several experiments on multiple datasets, and demonstrate that it is the new state-of-the-art for the AE based generative models.