EP 26 – What is a Health Savings Account (HSA) and How Can You Self-Direct It?

Self-direct your HSA and invest in what you know. Listen as Mark shows how he uses his HSA to invest in owning Cows, Hay, Crypto Mining, and a rental in Chicago that he bought ten years ago. Mark explains how his rental in Chicago paid for his daughter’s braces. Mat uses his HSA to invest in public stocks and crypto. Why an HSA? You get a tax deduction when you put money in and it comes out when you have medical tax-free at any age. This is the only deal out there where you get a tax deduction on the way in, tax-free growth, and it comes out tax-free for health care expenses. This is an essential strategy that should be used by both low and high-income investors as there are no income phaseouts.
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Mark Kohler: Yes, your IRA can own real estate. From the rental down the street, to a flip in another city, to a short-term vacation rental – these are all investments you can own with a Self-Directed IRA at Directed IRA. Mat and Mark break down the rules and structures for these common investments.

Mat Sorensen: Welcome, everyone, to the Directed IRA podcast with Mat Sorensen and Mark Kohler, although today you might be thinking, is that Justin Timberlake on set with Mat Sorensen today?

Mark Kohler: Oh, sorry. Yeah, let me get my stunt double. Justin, you’re off slide. Right? Jeff So those watching on YouTube, you would have just seen a switch there?

Mat Sorensen: Yeah, we got Mark look. And he’s looking dapper today. I just you know, give him a little love.

Mark Kohler: Yeah, well, if you’re if you’re kind of a Justin Timberlake fan and who isn’t, you’ve seen in some of his videos, he’s gone a little country. He’s wearing flannel and it’s say anything. Another video he shot in Jackson Hole. Just a hop, skip and a jump from me here. He’s got a place in Jackson Hole where all the millionaires and billionaires live. But Idaho is getting to be a hip spot. You know, Jesse on Breaking Bad, Aaron Paul, he’s got a place in Idaho now. Lives are full time. OK. Harrison Ford keeps his plane and Driggs half hour from here. I mean, people you know this is hip.

Mat Sorensen: Yeah, it’s I mean, it’s pretty much Hollywood. You could say that.

Mark Kohler: One could say that. Whether or not it’s true. Yeah.

Mat Sorensen: Yeah. It’s like Jesse from Breaking Bad. I mean, he’s he’s a little B list celebrity now, right?

Mark Kohler: Oh, that hurts. I’m trying to get him on the show and you just pulled that. Yeah, OK.

Mat Sorensen: It’s not like he’s your neighbor in Idaho. Geez. OK, we were out

Mark Kohler: Mowing lawns last night hanging out. Yeah.

Mat Sorensen: Well anyways, we’re just trying to have fun here. Today, though is a serious topic, but also one we think pretty cool using a health savings account which you can self-direct. We have a lot of accounts here. I actually self-direct mine, Mark Self-directs his. So we’re going to dive in to the HSA, how it works, how to get money in, how to get it self-directed, cool things we’ve seen people do with them.

Mark Kohler: Yeah, there’s a lot of unique strategies with the HSA and some of you may think I make too much money for an HSA. There’s no Phase-Out limit. The requirements are very friendly for the wealthy, so we don’t want to discourage any of you from not listening further in the show. Welcome. If you’re a new listener, both Mat and I are tax attorneys and I don’t know, just regular guys just trying to have a good time.

Mat Sorensen: Yeah, just two dudes with a podcast we have to podcast. This is, you know that the main street business podcast we’ve had for years where we’re almost up to two million downloads between the two, but. Well, let’s explain. Oh, no, let’s let’s give a little update on Self-directing Actually, yes.

Mark Kohler: I got news flash.

Mat Sorensen: Ok, yeah. What are you doing with your HSA or other self-directed accounts?

Mark Kohler: I’m first Ok, I’m going to actually do a visual demonstration here for those that are on YouTube

Mat Sorensen: For those on the podcast. Listening on audio this is great for you.

Mark Kohler: Mat will give play by play. Explain. OK, you’re doing, you know, like a basketball game for those.

Mat Sorensen: Ok, all right.

Mark Kohler: All right, Mark.

Mat Sorensen: Justin Timberlake bending over to pick up. What does he have in his hands?

Mark Kohler: His shoes, my shoes. Oh, really don’t want to see the bottom yet. OK, so Mat and I are going to give you a little update on what we’re doing with our self-direct in our personal lives, we thought. Anybody listen to show should know, hey, are these guys doing frickin what they’re teaching and we have done so for years, we used to speak at all the custodians around the country trying to help people catch the vision of Self-directing. And then we were lucky enough to team up with some other investors and get approved. It took years. Mat Sorensen really spearheaded that. And so now we’re officers at Directed IRA Trust Company or Directed Trust Company DirectedIRA.com. So anyway, that’s been the impetus for the show. And OK, I’ve got my HSA. And one investment, I’ll briefly give all my self-direct an investment, so I have my HSA owning an LLC named the Kohler Dutton Livestock Company. Or LLC Kohler Dutton Livestock. Now, for any of you that are

Mat Sorensen: And Dutton’s a silent partner in this business, John Dutton of course from Yellowstone fame,

Mark Kohler: If I need some weight thrown around or

Mat Sorensen: By silent we mean, by silent partner, we mean like nonexistent. Yeah.

Mark Kohler: I don’t want to get sued here from the prime original. Whatever the Yellowstone series, it’s a pretty cool show. So I bought five cows. These were mama cows. And about a month ago in my HSA and my LLC Kohler Dutton Livestock and they gave birth this last month over the last three to four weeks to five bull steers. Now that’s fairly rare. Usually there’s a mix of boys and girls. Yeah, my rancher. You said your your mom’s gave and that’s good. A bull steer is more valuable than a heifer, which is a female calf. So I say bolsters. Oh my gosh. Someone out. There’s bull calf, they’re bull calves. They’re going to be steers soon, which is a very tragic day in the life of a bull. But yeah, these are bull calves. Someone already is like, this guy is an idiot. Yep. You’re right. I have no idea what I’m doing. I watch Yellowstone, so I think I can be a rancher. So anyway, for lunch today, I went out and looked at my 10 cows that are down in my HSA and I was going to demonstrate that I ruined my good shoes walking through. That’s cow poop on the side of my shoes for those on YouTube. So I’m going to have to go home and wash my car. These are brand new. I bought these Johnson and Murphy’s just last week and then my team at the office was like, let’s go take pictures with the cows. I’m like, all right. And I get out there and I’m like, this is my new shoes. Cows poo pastures have cow poo in them. So I got to fix my shoes. I didn’t I didn’t wear my cowboy boots. OK, so my HSA, I bought hay and cows in my HSA, OK, your turn, Mat. What do you got going on in when your retirement accounts.

Mat Sorensen: Ok, well I’ve been doing Crypto lately, you know, I’ve got some rentals in them as well.

Mark Kohler: Oh, you’re choosing one. Gosh.

Mat Sorensen: Ok, I’m going to talking about the Crypto. OK, you know Crypto has been a roller coaster so and it did were down profits down almost a third bitcoin Ethereum the main stuff. So, you know, Elon Musk sends out one tweet and the whole thing goes, whoa, but that’s what I’ve been doing. And I’ve actually bought more in the dip, so to speak. So we’ll see how it comes back. And I’m not going all in on it. For those listening. Just so you know that’s the majority of us just and the the good old tried and true stuff like real estate, but something I’ve been interested in and I’ve seen a lot of other smart people going into. There’s certainly a lot of dumb people too doing it. But but yeah. So that’s why I’ve been up to.

Mark Kohler: Ok, that’s in your Roth.

Mat Sorensen: That’s in my Roth IRA.

Mark Kohler: Do you have an LLC for that?

Mat Sorensen: I do not. I do it right out of my it’s linked to my Gemini trading account with my Roth IRA here at Directed IRA and I log in and that morning it woke up when the market was in the dumps and it was at thirty thousand, you know, mid thirties for Bitcoin. That’s when I bought. So because I was able to log right on, boom, do it right then.

Mark Kohler: Sweet I checked in my cows, checked on my cows at lunch. You bought some Bitcoin in the morning. That’s a different lifestyle we have. Yeah, we’re kind of the billionaires. Bobby Axelrod gets on his. Just buy some bitcoin, OK? My other investment in my Roth IRA, I have an LLC called Waterman’s Challenge. We won’t go there today, maybe later, maybe we will because we’re talking about HSAs. But my Roth IRA owns an LLC that is crypto mining. So I have a three graphics card mining rig and it’s a dual LLC structure. One is a C Corp one’s an LLC. We’ve done some prior recordings on that. You’ll want to go watch those we diagramed amount. You’ll want to watch that on YouTube specifically. I think you’ll love the the layout visually, but my mine’s plugging along and it’s creating a lot of bitcoin, the bitcoin is down. But I get the same quantity. I get. It’s actually interesting and I’m all about it.

Mat Sorensen: You’re getting more bitcoin. Yes. Yeah, because

Mark Kohler: I get so it’s like I get paid five bucks. If Bitcoin is down, I still get five bucks for my

Mat Sorensen: Bitcoin at the time. Yeah.

Mark Kohler: Because Bitcoin comes up. Oh man. My my mining rig is going to be rocking and I’m looking at it right now. I mined about three percent of one bitcoin in the last six weeks. So I own point three percent of one bitcoin. And are you going in a rig that only cost me 10 grand, so I’ll pay for my rig within the first eight to nine months and all that is gravy after their folks. All right. OK, do you have any other investment?

Mat Sorensen: I do. But let’s get into the HSA. Something exciting about them.

Mark Kohler: We got some real estate going too, Mat and I have some real estate, but we got mining, we got Crypto, we got cows. Hay, rentals, nothing too sexy. OK, so agencies, why don’t you introduce what is an HSA and why does rich, poor, young or old need an HSA?

Mat Sorensen: All right. This is the health savings account. But don’t be dismayed by savings in the name there. You can invest this thing. All right? So you can actually buy whatever you want. You can buy real estate. You can buy cows. You could buy Crypto with an HSA. We’ve actually seen a lot of HSAs come over because many people have them with ten thousand five thousand smaller balances and they’re like I’ll just buy some Crypto with it, you know. So a lot of times some smaller balance. You might have smaller balances in it, but. Health savings account the cool thing about the health savings account, this is my I think the very unique thing about it for all other accounts. You put the money in, you get a tax deduction, and like Mark said, who cares how much money you make? There’s no Phase-Out. You could be, you know, Elon Musk, you could be John Dutton, you could be Bobby Axelrod, whoever, OK? And you know, you’re going to there’s no income. You are going to get a tax deduction. It’s on page one of your 1040. Um.

Mark Kohler: Ok, let me add a couple of things. Can I do that? OK. So health savings account for your health care. And. When you put money in, you get a tax write off on the front page, your tax return. The only requirement just to get there is you have to have a high deductible health insurance plan that offers minimum coverage in certain ways. It’s kind of a health savings account, qualified plan. Now, the health insurance company you go to does not need to give you the HSA account. They’re going to give you insurance. You just go open an HSA. You have to check a box under penalty of perjury that yeah, I have a high deductible plan. That’s it. No one’s going to call your insurance company and double check. This is you are on your honor system. Don’t get audited. Don’t cheat. So you can go to work. You and your spouse can go to work and opt in for a high deductible health savings account, health insurance plan, and then go anywhere you want and open your HSA account to make deposits. Now, maybe your employer will give you a pittance and give you a hundred bucks a month or something, which is not a use it or use a plan. If they go, hey, if you sign up for the high deductible plan, we’ll put a hundred bucks in your HSA every month. Right. You can have an HSA at work that they’re putting 100 bucks in, probably comes with a debit card and then you could open an HSA at Directed IRA and go buy cows or bitcoin, or regular stocks that you would prefer. A typical HSA provider is only going to give you a basic mutual fund to choose from. They’re usually sponsored by one particular mutual fund with two or three risk options. But the beauty is once you get the money in you get a write off, you can open the HSA anywhere. And the only requirement is that you have health insurance somewhere with your own business. Personally, day job through spouse doesn’t matter. You just got to be on a high deductible plan. Next point, Mat as we describe these.

Mat Sorensen: All right. Now you can use it for health care at any time, OK? Now, some people like to use it as just a tax strategy. You know, I got to pay my kid’s orthodontist bill. It’s a thousand bucks. Let me put a thousand in my HSA and I’m going to pay the orthodontist out of my HSA. A thousand bucks, OK? You know, and that you basically that now that was tax deductible where otherwise if you just paid the dentist or orthodontist or doctor, whoever, you know, you’re getting zero tax deduction on that generally. So so there’s a you can use the money for medical as it comes up. And if you don’t have medical, keep it invested in all these other assets we’re talking about and you’ll have it for the long haul for you. And, you know, you can use it for, you know, all types of medical prescription drugs. Obviously surgeries, like I said, dental, mental health, long term care. When you’re older, I mean, all those things are eligible expenses for that. Your health savings account can spend the money back out.

Mark Kohler: Kind of. I love it. Now, I want to give some actual numbers here on how much you can contribute this year. And I don’t have a calendar in front of me.

Mat Sorensen: Yeah, I got it here. So it’s thirty six on our sorry contribution. $3,600. Mm. Single individual I say and then $7,200 family. That’s 2021.

Mark Kohler: Ok, and if you’re head of household, if you’re not married but you have at least one child in the home or dependent and you have a group policy because you have a dependent, that means you can get the family plan. So you could put in your seventy-two hundred this year. You actually have until next April 15th to put that money in for this year. You could incur a medical expense now put the money in in November and reimburse yourself for your expense you just had this week. Or you could put the money in now, invest it and wait to hear until you have a health care expense in November. So, yes, there are lots of flexibility. They’re trying to make this easy for people to reimburse themselves for prior expenses, make contributions and reimburse themselves later. The government hasn’t emphasized the hold it in best strategy, which we’re going to they’re trying to just they’re just trying to say, put the money in, take it right back out. Now, one caveat is you have to have the account open. That’s the beginning period of when you can start reimbursing yourself for expenses on an extreme example, you could open an HSA today, put one hundred dollars in it, not even make it 2021 contribution, not even make a 2022 contribution. But you could make a 2023 contribution and go back and reimburse yourself for expenses in ’21, ’22 because you had the account open. It’s not when you put the money in is when you open the account. So our primary recommendation to clients is get the account open, put in a few bucks. Now we’d like you to start investing it until you need it or until you reimburse yourself, but it’s a good record keeping strategy, get started now.

Mat Sorensen: Yeah, good tip. Now, remember, with this, I’m getting a tax deduction to go in, it comes out when I have medical tax-free at any age. You’re not waiting to hear fifty-nine and a half or any that age. And the growth is tax-free. This is the only deal out there where you get a tax deduction on the way in tax-free growth and it comes out tax-free in this case for your qualifying health care plan.

Mark Kohler: Isn’t this crazy? We’re not even done telling you all the good things about this. Some of you’re probably blown away publication 502. If you’re not driving right now, try to write that down, make a mental note. If you are driving or on a treadmill, don’t kill yourself. IRS publication 502 is your best friend. That’s a that’s a document seriously that I have literally saved on my desktop. It’s the only one. The reason why is this publication is kind of like your manual of all the things you can write off that are valid medical expenses, mileage to the hospital, mileage to the doctor, that hotel and food where you travel to a hospital, maybe further away for treatment, co-pays, deductibles, dental, chiropractic, massage therapy prescribed by a doctor, physical therapy. The list goes on and on just now, drug rehab for a you or a family member that needs to go into a facility, adoption, plastic surgery, that’s not cosmetic.

Mat Sorensen: I know. Now, let me throw out. I’m going to throw out some additional little tips here, I’ll look at maybe maybe I’ll surprise you, Mark’s kind of an HSA wizard, you know.

Mark Kohler: So you guys going to school up?

Mat Sorensen: Yeah.

Mark Kohler: Ok, before you do, I mean, just say on the plastic surgeon comment, I’ve got to you know, being a tax attorney, you make friends with people that are trying to save taxes. Some of those are going to be plastic surgeons. Great guys. I won’t I’m not going to say it because

Mat Sorensen: We had an explicit rating on one of our episodes and will go like, how did that Happen?

Mark Kohler: Yeah, I know I’m not going to I’m not going to say anything no puns. No puns. There’s some puns that we could go with there. But I’m not. But the beauty is, is they need tax advice all the time and I need work all the time. So what you see here? Yeah, this is Stick’s this is a lot of work. Yeah. So for those on YouTube, I’m doing a little hair therapy right now. I don’t I’m not embarrassed. I’m going to say this, I, I was hanging out with my plastic surgeon last week. Now this is is hair restoration on publication 502. Is that tax deductible? I’m going to look right now.

Mat Sorensen: I don’t know. That seems cosmetic to me.

Mark Kohler: It does. It does. But I’m going to look right now. OK, but while I’m looking this up, OK? I went in and what they do is they draw your blood, your arm, they spin it in this cool little centrifuge and split out your plasma like, you know, people that donate plasma for big bucks. Yeah. You know, college students or whatever. Well, they take your blood drive. I’ve done blood drives, but not plasma. Plasma is painful, have you donated plasma?

Mat Sorensen: I didn’t know that was a difference between a blood and plasma.

Mark Kohler: Oh yeah. Where’s my producer? Corey, have you donated plasma. Yes, it sucks. Yeah. It’s not like cookies and milk at the high school gym. Donating blood. It’s frickin painful anyway. So they but they pulled my blood out. They spin out the plasma and then he sucks it into a needle and he injects it in my head and I’m on my third treatment. And look at this. Look this full, you know, like this. I mean, I just I just want to throw that out. You guys watch on YouTube, big man. That guy’s got a full head of hair. Yeah, it’s the plasma treatment. Yeah. I’m got to see if it’s tax-deductible.

Mat Sorensen: Hair club for men. We’re like the guys. Like I’m not only the president of Hair Club for Men, I’m also a customer.

Mark Kohler: Yeah, yeah, yeah. I, I just got the hair club for men. This is not fake hair. They’re just shooting plasma in my head.

Mat Sorensen: And we got a good angle of your head right now. Any of you on YouTube right now.

Mark Kohler: Oh sorry. I’m looking down. OK, ok. You’re kidding. OK, here’s the rules. See this is my publication 502 is important. So me, I think I’m just being stupid. An example here of joking around. But this is it.

Mat Sorensen: Oh no one’s thinking. No.

Mark Kohler: I was talking about Mat of course, but this is how it works. You’re sitting around at dinner going, hey, can I write off my pet, my comfort pet that I have a letter from my doctor that I need emotional support animal. The answer’s yes, but you wouldn’t know if you didn’t have publication 502 on your phone. So I just pulled it up here, let me tell you. So this is why you think about it. Go guys are worried about their hair. Some women not as much, but a wig you can include in medical expense, the cost of a wig purchased upon the advice of a physician for the mental health of a patient. Oh, I didn’t know that. Who has lost all of his or her hair from disease. Hmm, that’s interesting.

Mat Sorensen: Baldness, a disease male pattern in the patient of cancer patients.

Mark Kohler: Yeah, male pattern baldness, hair transplant falls under cosmetic surgery. And you cannot include in medical expenses the amount you pay for cosmetic surgery. This includes procedures for your appearance unless it’s to prevent or treat an illness or disease. Oh, I don’t think so. This is not going well. I don’t think I’m going to electrolysis or hair removal. Nope. It’s all cosmetic bummer. No, write off for that, people. OK, but I’ll keep looking while Mat gives his cool tips. OK, what’s some tips here? I want to hear what you got. Maternity clothes that you’re going to go with your muted.

Mat Sorensen: I was going to go I was actually looking up a Seinfeld quote, I love the Seinfeld episode where George is complaining about someone who has a wig. I think it was a girl he was dating or something. And Elain get’s so pissed off at him, just like your bald. What are you talking about. how are you complaining about this, you’re bald. OK, here’s the tips. These are just kind of, you know, factoids, I think, that are helpful on an HSA. OK, first, you don’t need earned income to contribute to an HSA with your IRAs. And 401ks, you have to have earned income to contribute. So wage income or self-employment income. But an HSA, you just need income. It can come from any source. You could have rental income, investment income, and you can still contribute to an HSA. OK, did you know that one?

Mark Kohler: I did, I did OK. And maybe not everybody knew that, so that’s OK.

Mat Sorensen: All right. Next one, ok. Your spouse can inherit your HSA so you can pass on your spouse to your spouse when you pass away, which is similar what you can do on a spousal IRA so a spouse could inherit the account, no tax and can continue to use it for their medical.

Mark Kohler: Ok, well, we’re talking about age. Another tip now. We’re going to talk about how to self-direct it in just a moment. But hopefully by now all of you are like, oh, my gosh, I’ve got to get one of these. And sometimes when you’re really unhealthy, you’re like, I’m really relying on my health insurance right now. A certain provider, a certain plan, a certain treatment. Changing plans right now is not an option. I get it. But let’s say you get through the woods and you’re you’re doing well or some of you right now that are healthy and you don’t even use your health insurance. You’re a perfect candidate to say I’m going to go high deductible. I’d never go to the doctor anyway. And if I do, I’ve got insurance to is a failsafe. It’s a safety net. But in the meantime, I can contribute to my HSA along the way, get a tax write off, and then when I do need it, I can go grab it tax free, but I can get cheaper insurance possibly along the way now.

Mat Sorensen: I love it now we’ve mentioned like qualifying plans, right. You have to have a high deductible health insurance plan to qualify for an HSA. If you have no insurance, you can’t do an HSA. If you’re doing a cost sharing ministry or something like that, cannot do an HSA, you have to have a qualifying high deductible health insurance plan. And most insurance brokers, if you’re buying an individual marketplace, it’s very clear they’ll say HSA qualifying plan. It’s not just the deductible amount. Be careful. There’s a couple other requirements that are hard to explain here, unlike what the coverage is for a qualifying HSA plan, but it’s going to say on it. HSA qualifying, they market it as that. So just look out for that.

Mark Kohler: I’ve looked it up for this year. 2021. The minimum deductible, meaning a high deductible plan. It has to be a high deductible of at least fourteen hundred dollars if you’re single. Twenty eight hundred dollars if your family. But if you divide that by 12, that’s a couple hundred dollars a month. Well, you might be able to get a cheaper policy for a couple hundred dollars a month. Put that in the bank. If you don’t end up using it, you saved it. If you do, there’s your deductible. So what you’re hoping is that your insurance premium lowers and creates that cost savings to cover the deductible if you really do need to rely on it. Now, here’s here’s some bad news if we got to get bad news. When you turn 65, you can’t put in new contributions, you can keep an HSA if you built one up and you’re still invested in it and you’re drawing on it, that’s cool. But when you pass go January 1st every year, you can’t put in another seventy-two hundred bucks. Now, as people get closer to that age, they do throw throw your bone between age fifty-five and sixty-five, you’re able to put in an extra thousand. So if any of you are in your 50s, you want to get this account open, start plowing money into it and investing it because you’re going to need it. The number one reason for pulling money out of a retirement account are for medical expenses. This is your retirement account specifically for medical and they’re so easy to get a write-off in without any conflict of any other plan you might be in at work or in your small business or other employees. It’s yours if it goes with you everywhere.

Mat Sorensen: And the design of it now is your earning and you have income. You need tax deductions, you get a tax deduction. Now you get to invest it and grow it, pull it out tax-free in retirement. Or if you want to hold it for the long haul again, you could spend it on medical, whenever you want. But what we’ve seen a lot of our clients do, and I think is wise, is they don’t take it out unless they really need it. You know, they like to keep that money invested. And it is kind of this thing they’re looking for later in life to be a resource to draw on for their future medical, possibly long-term care, and these other expenses that, you know, we end up facing later in life.

Mark Kohler: Yeah, well, I’ve got to say, I was outside is it’s still a little cold. It’s spring here now that I’m in the studio and it’s warm and my shoes are warming up, I don’t want to describe the smell. That’s kind of like, yeah, it’s just kind of here in the studio now. Can you take

Mat Sorensen: Thanks for sharing that?

Mark Kohler: Yeah, they called Cowboy Boots Shitkickers.

Mat Sorensen: Yeah. There goes. There goes our E rating.

Mark Kohler: That? Are you ready. Is that me

Mat Sorensen: Reading. I’m sorry. I know how we get this book.

Mark Kohler: I was like, hey, you know, if you’ve got kids in the car, this is a chance to talk about farmer swearwords. There’s a just a few farmers swearwords, you know, that just,

Mat Sorensen: You know, OK,

Mark Kohler: Yeah. Tate in season three of Yellowstone is learning that hanging out with the Callaghan’s, you know, little grandson of John Dutton. OK, OK.

Mat Sorensen: All right. I haven’t gotten in season three. He’s still alive then. OK.

Mark Kohler: Oh did I just spoiler alert

Mat Sorensen: He was kidnapped.

Mark Kohler: Oh you’re ruining it. OK, no more talking. No we’re talking. We’re going to ruin it for someone they wouldn’t kill a kid. Come on. All right. You knew he’d

Mat Sorensen: Be alive and there’s some mean deeds up there. Yeah, that’s true. That’s true. Evil people.

Mark Kohler: They’re OK now. I’ve got to give another. OK, let’s get into Self-directing and then we’ll come back to agencies because I want to let’s say you’re like my ball in guys you sold me. This makes perfect sense. I should be building my Roth, my spouse’s Roth, my mom and dad’s Roth. That’s my goal this year is to get Roth going for my mom where I’m the beneficiary. And I’m telling my brother and sister I put the money in for my mom. So back off when it’s when it’s settlement time at the estate that Roth is mine and it’s not counted against me and my other share of the estate. So an inherited Roth is amazing. So some of you may be building your own Roth, your spouse, your kids, your parents, helping them give you money, doing whatever it takes to build those accounts. You also may be doing your 401k at work, getting a match, then getting out. You may have a solo for when can your side hustle in your small business on the side. Very doable. You might be doing the mega backdoor Roth, the backdoor Roth period. So many little strategies we talk about on the show. HSA is in the mix, same thing. Get that HSA started, get a funded, start investing it. You can buy stocks, bonds and mutual funds. You can Self-direct into Crypto. You can buy cows, whatever you want that you think you’re going to get a better rate of return than that piece of crap. Two percent the bank’s going to give you on their HSA account. That’s why we’re doing this two percent.

Mat Sorensen: They’re not paying two percent. That was that piece of crap is like half a percent if that. If that’s right. Yeah.

Mark Kohler: Now, once you get your account set up, it’s like any other Self-directed account, you’re going to love it. The team directed IRA, calls you up and says, hey, we got your money. What do you want to do with it? You know what? Mat on my way here to the studio today. One of the ladies, I won’t say her name, called from your office. She’s just right out the door from your glass window. And she called up and she was like, Hey, how are you today, Mr. Kohler? I just wanted to call and let you know we received your money. And I don’t think she knew it was me. Mark Kohler, CFO of the company. She was just on the front lines doing her job, calling everybody for the day. She was like, we received your money. Did you get my email? I’m like, yes, I did. And she goes, Well, we need to get you to sign this other form. I want to get these accounts funded today. I’m like, OK, thank you. Can you tell me why you’re doing this? And she was smart. She was helpful. And she’s like, you know what, Mark? I’m going to prepare that form for you and send it right over. I said, thank you very much. And she goes, then when your money’s in your account in the next day or two, call us back and let us know where you want to invest it or use the direction letter on our website. I like Mat. Sorensen is really training this gal. She knows what she’s doing.

Mat Sorensen: Yeah, that’s how we got the dream team over here. We totally do not going to lie.

Mark Kohler: Yeah. Call up another custodian and try to get a person that even knows what they’re doing. Yeah. Oh my gosh. There’s people answering the phone at Directed IRA which is novel. OK, so that’s how you self-direct. I mean from there it’s the same old crap we’ve been teaching prohibited transactions LLC multimember. UBIT.

Mat Sorensen: Yeah. And some of you may have an HSA, you know, you already have the HSA. Maybe your employer did set it up as Mark talked about, or maybe you’ve just been doing one at your bank or you’ve been in a mutual fund and you’re like, I’m kind of over this. You can also get that over to Directed IRA and you can start self-directing it into whatever you want to do here. I mean, we’ve had some clients just at the brokerage account to an HSA because that’s kind of hard to find. You know, of course, you can do the you know, you can buy cows like Mark, you know, if you’re into that and and the smells that are associated with it, you can buy crypto. You have private companies. We’ve even had clients just you know, there’s a lot of these crowdfunding platforms for startups where you can invest even smaller amounts. You know, a lot of private company investments used to be 50 grand. But now you can throw in five thousand bucks into certain deals, a couple of thousand bucks. And there they’re a little more risky, of course, because they’re startups. But again, you just get to invest in what you know. You can take greater control to find the things that you like and interest you,

Mark Kohler: Especially in crowdfunding. There’s some of those websites have really exciting things going on. What I’m earning I just looked at this, which is fun for me as I’m looking at my crypto mine and I know some you’re like he’s buying cows he’s doing crypto mining. I’ll be honest. I know I joke around a lot, too. But Mat and I have been we’ve talked about this when we have our personal planning sessions is we’ve got to be doing what we’re talking about and teaching. I didn’t spend 50 grand on cows. I bought ten grand worth of cows. And I love it. I love talking about my daughter who’s in high school. So, Dad, I told my teacher, all my friends, that we have cows. Can you take a picture and send it? And you know what? It’s fun. And so how many of us are sick and tired or bored with our retirement account and a mutual fund? We have no reality of what it’s even invested in Mat you do that at workshops. You have people raise your hand. How do you do that? Yeah.

Mat Sorensen: Yeah, what I teach to real estate agents, I used to have a class. I go teach real estate professionals and it’s a continuing art class. I’d say, how many of you have a retirement account? Half the hands go up. How many of you have a retirement account invested in a mutual fund? Most of those hands are still standing up. How many of you can tell me a good mutual fund you’d recommend someone to invest into? Everybody’s hand goes down. Oh, wait a second. Every one of you had your hands. If you have a retirement account, you’re invested in a mutual fund and none of you can tell me a good one. Sometimes I’ll have someone get well, the basically they’ll basically give me like a something that models that an S&P five, S&P five hundred, you know, like an S&P five hundred fund mutual fund essentially. And that’s about it. And so and then you’ll hear people will be like, wow, I don’t even know what mutual fund I have. I couldn’t even tell you the name, let alone tell you what that mutual fund owns like people have gotten so disconnected from their money, so then I’ll ask them again, these are all real estate professionals. I say, how many of you could tell me a good real estate deal, like almost everyone’s hand in the room goes up? I saw a property I think is a good deal or could be a good rental or has is undervalued or could be fixed and sold, you know? And I’m like, why are you guys buying mutual funds with your retirement account? Like you see real estate, you’re in the business of it like you have a competitive advantage out there. Put your money to work and what, you know, invest in what you know. So.

Mark Kohler: I love it. And so I was just going to say I can look at my mining report and basically with the three graphic card mine through mine hash and my app here, I can make I’m making it about five dollars every four hours. And so in a 24 hour period, that’s six periods, times five. So that’s thirty dollars. So I’m making I’m making a net return of thirty dollars a day when I even know when I’m sleeping and think if you did this in your HSA, see this, turn this all around. I got my Crypto mine going for approximately ten thousand dollars about three months ago. Now that I know the price of graphic cards can be all over the place and getting someone to host it for you and all that. But let’s say you’ve got your contribution for last year and your contribution for this year and you’ve got 15 grand sitting in your HSA. Well, could your HSA be making thirty dollars a day? So let’s just do the math. Thirty dollars a day times 365 days a year. My Crypto mine’s going to make ten thousand nine hundred and fifty dollars. Divide that by a fifteen thousand dollar investment. That’s a seventy three percent rate of return. Now is the mine going to go down for a few hours here. And I got to call my techie and go. I just got an alert on my phone. Why is the why is the mine down or this or that, but 70% or one percent at the bank. Crazy and people do this in real estate, they do it with hard money loans, they do it with developments. Yeah, online businesses, livestock, commodities. Yeah, all sorts of goodies. So.

Mat Sorensen: Yeah, yeah. So. All right. Well, that’s the HSA. When you set up the account, you know, your contributions for 2020 has passed as of a few days ago. So, so of course get your seventy two hundred bucks in family. Thirty one hundred bucks single. Is that right. Yeah. Or 2021. And, and I just get to investing and again it’s there when you need it. If you need to sell some of these assets to, to pay upcoming medical, it’s there when you need it, but you don’t have to leave it invested if you have the funds otherwise cover those those medical out-of-pocket expenses.

Mark Kohler: Now let me give you a little deeper strategy here. Just before we leave. This was I wrote an article on this. It’s on my blog. So anybody up MarkjKohler.com can go check that out. It’s also populates on the Web law firm Web site, an accounting firm Web site. Let’s say you’re listening and you’re 65, but your spouse is 32. All right. Now, I’m sorry. Sorry, I meant 52. OK, so I mean, Mat lives in Scottsdale, so didn’t even faze him. I mean

Mat Sorensen: Like. That’s going to be

Mark Kohler: Very seriously, people I looked at Mat and it didn’t even faze him, he’s like, OK, continue to continue. I’m sorry. I went to a steakhouse with Mat in Scottsdale and I was like, this is really nice. All these grandfathers taking out their granddaughters. What a loving family area this is. And Mat’s like uh Mark I think those are their girlfriends or wives? I’m like, what? OK, we’ll leave it at that. So anyway, if you’re 65 and your spouse is 42, she would do a single HSA plan and put in her thirty six hundred if they if your spouse is 52 start. Same thing. Thirty six hundred. But if she’s over age fifty five and you’re over age sixty five she would go with the single plan and do the thirty seven because she gets a thousand make up right now. Let’s say you’re both. 57 years old, would you do a combo plan and put in your seventy two hundred plus a thousand for seventy three, not a good idea. You would want to both set up individual accounts for thirty six because you each get a thousand at that point. Now both of those HSAs invest together in an LLC. Absolutely. But you got an extra thousand as a write off on your tax return that just saved you two or three hundred dollars and you’ve got an extra thousand to invest tax free. So when you’re in this 55 to 65 range, you’ve got to think of how can we get the most in our contribution amount by doing single plans or combine plans. And there’s a lot of tricks and strategies to try to get the most bang for your buck. OK, and here’s the other one. Let’s say that you’re 60 and your spouse is 45. You can do a married plan and do the 72 plus a thousand because at least one of you is 55. Nice. OK, so there’s all sorts of things that are fun.

Mat Sorensen: Ok, so remember that’s an extra thousand from thirty six hundred forty six hundred or an extra thousand seventy two hundred eighty two hundred.

Mark Kohler: I probably set it wrong in that didn’t I.

Mat Sorensen: Yeah. You said thirty seven hundred and I was like I

Mark Kohler: Added a hundred but not a thousand.

Mat Sorensen: Sorry I know you’re a CPA, but I was trying to make that you got to carry that extra zero. You forgot the extra zero. Yeah.

Mark Kohler: And to that is zero is important because kind of what are they calling a rinky dink accountant, Mickey Mouse. Mickey Mouse to go kind of Mickey Mouse accountant do I have cheese? I’m I like Disneyland jeese.

Mat Sorensen: Yeah. That was a little offensive. Not an insult. That’s not an insult.

Mark Kohler: Oh, one other piece of news. Justin Bieber just canceled his concert in Vegas. Oh, it was going to be a July concert, again, for a travesty of covid

Mat Sorensen: They even got Beebs huh?

Mark Kohler: I know I was so and Britney Spears, she said until my dad’s removed as my conservator, I’m not performing. I’m sick of my dad making money off me. And she’s petitioning the court again in California to get her dad removed as a conservator. She’s like, I’ll take a conservator. Just not my loses dad. That’s been living off me for 30 years, taking advantage of me. I’m I’m done. And so that what a beautiful weekend. Little Beeb. Little Britney Spears.

Mat Sorensen: That could have been a could have a great weekend in Vegas, but nothing’s all right now. Well, thanks, everybody, for tuning in. Hope you learned something about health savings account really is an underutilized tool, particularly in the Self-direct ad space. A lot of our competitors don’t even offer it. Frankly, I understand how cool it can be, but we’ve had lots of clients use it successfully to buy cows and other cool things and also to saves tax attorneys, to the estate tax returns. You know, you see that deduction on the return, whether you itemize or not, you get it. It’s above the line, so to speak. So it’s a cool tax strategy. It’s a nice way for those of you looking for tax deductions, maybe high income.

Mark Kohler: Yeah. And forget the joke about the cows just to show the diversity there. But I also have another HSA account that owns a rental property and has owned a low income housing rental property in South Chicago for the last 10 years, bought it for forty-five thousand dollars. It’s got a Section eight tenant in there and I still own it in my HSA. Cash flows a couple hundred bucks a month and it’s been building my HSA. That HSA paid for my Molly, my daughter’s braces. And so you go there you go tax free. So that’s that little real estate project has been a nice little thing. It was a seller financed sale. No credit on me. So it was a nonrecourse loan and I funded my HSA. I think it was for four or five thousand dollars ten years ago and put down 10 percent. So on a forty five thousand dollar low income housing single family home, forty five hundred was a down payment. And then the seller carried the note. And I still have a mortgage against it and I’ve got a little HSA rental. So it doesn’t have to be anything completely outside of your wheelhouse. If you know of a rental near you, look around. So, OK, Mat take us out. This is the show by Mat Sorensen.

Mat Sorensen: Yeah, thanks everyone. If you like the show and you’re still listening, please give us a five-star review. We actually need some more five-star reviews or like it or whatever cool thing you can do on however you’re listening to it and to Directed IRA, we have a page on HSA. Is there a lot of the videos that Mark on HSAs are there some of the articles that we’ve referenced here are on that page. Just go to Directedira.com and search for account types HSA and you’ll find all the details there. Thanks for tuning in.


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