Directed IRA Podcast

Self-Directed HSA: It's Enrollment Time

• Mat Sorensen and Mark Kohler

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In this episode, Mat Sorensen and Mark J. Kohler dive into one of the most underrated wealth-building tools out there: the Health Savings Account (HSA). With open enrollment around the corner, it’s the perfect time to rethink your healthcare strategy and unlock the triple-tax advantages of this incredible account.

Mat and Mark break down how an HSA can save you thousands in taxes, how to qualify for one, and how to self-direct your HSA into assets you actually believe in. From real estate and crypto to precious metals and private businesses, they share real examples, walk through contribution rules, and reveal how to make your HSA a long term investment vehicle that can cover everything from braces to retirement healthcare costs, completely tax free.

Whether you’re an entrepreneur, investor, or just someone tired of overpaying for insurance, this episode will open your eyes to the power of the HSA and why it should be part of your wealth strategy today.

Chapters: 
0:06 - Why HSAs Matter Now
0:25 - High Deductibles And Real Costs
0:55 - Self-Directing Your HSA
1:17 - The Triple Tax Advantage Explained
2:46 - Real-World Growth Examples
4:06 - Level One Vs Level Two HSA
6:10 - Contribution Limits And Deadlines
8:16 - Contribute Early For More Growth 
9:12 - Getting HSA-Eligible Insurance
11:14 - Last Month Rule And Plan Changes
12:17 - Catch-Up Contributions After 55
13:22 - Choosing The Right HSA Provider
14:47 - Steps To Set Up And Fund
16:33 - What You Can Invest In
18:21 - Reimbursements And Qualified Expenses
20:11 - Wrap-Up, Resources, And Disclaimers

Directed IRA Homepage: https://directedira.com/

Directed IRA Explore (Linktree): https://linktr.ee/SelfDirectedIRA

Book a Call: https://directedira.com/appointment/


Other:
Mat Sorensen: https://matsorensen.com & https://linktr.ee/MatSorensen
KKOS: https://kkoslawyers.com
Main Street Business https://mainstreetbusiness.com



Mat Sorensen:

Welcome everyone to the Directed IRA podcast. This is Mat Sorensen joined by the great powerful Mark J. Kohler. And we're talking about something great and powerful. It's called the Health Savings Account.

Mark J. Kohler:

My favorite topic, and I I mean that. I like I am jazzed about the HSA. Mat, and I've debated, do you ever under your Roth IRA first or your HSA? It is a close call for me. So the Health Savings Account is critical because open enrollment begins November 1st. And that's a big deal for any of you that are entrepreneurs and trying to select the right health care plan. 80% of Americans don't even tap out on their deductible, meaning they're buying more insurance than they really need. So, which hence means maybe we could go with a higher deductible plan, fund a health savings account, and put that money away and grow it tax-free. And Mat, can we self-direct a health savings account?

Mat Sorensen:

Yeah, and we're not talking about just putting that money in the bank and getting nothing on it and losing money because of inflation. We're talking about investing it in something you know and believe in. Mark's bought real estate with his HSA. I've invested in crypto with my HSA. We've both done some really cool things. And that's what we do at directed IRA is like, once you put the money in the HSA, you can invest it and it grows. Now keep in mind there's three cool things about the HSA. When you put that money in, you get a tax deduction. Right? You can put in $4,300 single, $850 married, or just you and a child. Okay, this is a family coverage, okay. And I get a tax deduction on that. No matter my income, no matter whether my itemized or not, I get a deduction on my tax return, reducing my taxable income this year.

Mark J. Kohler:

No, I'm just doing the math in my head right now, because at our event last weekend people. Yeah. Well, I'm thinking through the math here because I want to tell you the power of this. Last week was our alt asset summit. You can get uh the virtual replays there. I highly recommend it.

Mat Sorensen:

And that's altassetsummit.com.

Mark J. Kohler:

Love that. Thank you. And one of the topics there was uh I talked about the Coverdale for kids, the college saving IRA. And I used an example that if you'd put $2,000 in a crypto Coverdale last year in October, same same month last year, and if you were an XRP fan, all right, I'm just saying, uh, this year it'd be worth $8,000. So you were able to forex the return. Now that's we're gonna have all sorts of returns when we and self-direct, some good, some bad, whatever. Some of you hate crypto, believe in crypto, some of you love real estate, hate real estate, whatever, to each their own. Hence self-direct. Now, if you were to fund an HSA for $8,000 last year in the month of October, and chose to do a crypto HSA, which you have that option on your app, you could be set up in nine minutes. I timed it. Last account I opened up. You would have had $32,000 in your health savings account today. People, this is paying for long-term care, dental, chiropractic, physical therapy, some over-the-counter drugs now, and of course prescription drugs. The list goes on and on. People, the number one reason for bankruptcy in America is health care expenses. The number one reason people pull money out of a retirement account is for health care expenses. Your HSA is more powerful, powerful, and valuable than you know.

Mat Sorensen:

Yeah, and the number one expense when you're retired and aging, medical. All right. And so this is a bucket of money we do want to grow. A lot of people leave this one on the wayside and we're like, guys, holy shit.

Mark J. Kohler:

They're gonna X rating, uh, explicit E rating. Okay.

Mat Sorensen:

I mean, I want you to know, you know, this matters, you know, is the the IRS is giving you a deduction when you drop this money in. They're saying go invest it in whatever you want. And that could be the stock market, you know, but like we're saying you could do more, you could invest and self-direct it in what you want. We've done some cool things here, and we're doing that every day at directed, and it comes out totally tax-free for medical at any age, you know, and so like and and I want to do another way to think about the HSA here, too, is when I was younger, I used the HSA and I would just put money in to get the tax deduction, and then I was paying for my kids' braces, you know, or just pull it right back up. You know, yeah, I I didn't have the disposable money to be setting it aside, but I had medical that I had to pay for one way or the other, and I wasn't getting a tax deduction. So I was dropping money in the HSA and spending it back out immediately in my 20s and 30s. I had kids and a family, right? We had medical costs and I was getting the tax deduction. That's level one HSA, okay? And I love that, okay, right? Who doesn't love a tax deduction? You can spend the damn money anyways.

Mark J. Kohler:

Doesn't phase out any age, or well, I should say up until age 65. You can do that all day long. Yep.

Mat Sorensen:

Now, level two HSA is what we're talking about here. Get the contribution in, invest it in an asset that's going to grow and build over time. So you have a big pot of money later on in retirement or whatever time you need to draw on that set of funds. You might have a big issue in your life, a big medical expense for you, a spouse, someone in the family, whatever it may be. But also keep in mind the time period you have that HSA, let's say you're saving in that thing 10 or 20 years, and you start saving it in 2025 right now, and now it's 2035, and you've got 10 years of medical. And this HSA now is worth 500 grand. Well, you might be thinking in 2035, I only have $1,000 of medical matter, $5,000 of medical. How am I even going to draw this thing down? Guys, you get to go back over that 10-year window to pull the money out, okay, because you had an HSA over that period of time. You can still reimburse yourself for the expenses in 2026, in 2028, in 2031. We're reimbursing ourselves back. And also, what happened over that 10-year window? That money I put in that I got a tax deduction for, I invested it and grew it in a tax-preferred manner. Whereas I was earning income and growing that investment, I had to pay no tax, and it's coming back out to me tax-free. It's freaking powerful.

Mark J. Kohler:

Well, amen. Man, you got me fired up. Hallelujah. Hallelujah. Uh now, uh, we could continue high-fiving, talking about the benefits and some nuances uh for the next 20 minutes. But I'll say let's let's uh slow the truck down here for a minute and let's do a few technical points. First, how much can you put in to your HSA this year? And as Mat said, it is a deduction essentially on the front page of your tax return. I think it flows through schedule two onto the front page. Uh forgive me, you accountants out there. It could be schedule one at the moment. I'm just thinking, but anyway, it flows in and the amount this year is $85.50 if you're married or head of household, and if you're uh single, it is $4,300. And that's a tax deduction. And I like Mat's point. You could put literally put it in and pull it out the next day for a knee surgery. You just generated a tax right off, which you wouldn't have got otherwise. So that's level one. So number two, you have until April 15th to put that money in. So don't stress, you don't have to do this next week. But you know what? I was telling Patty yesterday about your report. Okay, just to digress for a minute. Mat did an analysis that said, because Patty said, When do I have to put my money into my 401k to get the write-off this year? And I go, whoa, whoa, whoa. What did you just say? Jules, when do I have to put the money in my 401k? And I said, babe, you know what Mat Sorensen would say? He would say, Ask yourself, when do I get to put the money into my 401k? And and Mat said, because you could put money in your 401k for 2025 as early as January 1st, or up until September 15th, 2026. That's 18 months later for the solar. Yeah, 19 months later. So, Mat, what is the result of putting money into your HSA when you can versus when you have to to get the meta?

Mat Sorensen:

This is a great lesson, great point. I'm glad you're bringing this up. Is don't think of the deadline of when you should put something in, especially when we're talking about money that can be invested and growing tax-free here, coming out for tax-free for your medical. Put money in as soon as you possibly can because that money is going to start growing and be invested. It's interesting. There was a fidelity report that they they looked at that said the people that have over a million dollars in an IRA or 401k, and they looked at the characteristics of those people and what did they do? One of the things that was the most surprising characteristic is they contributed as early as possible. Once they have the earned income, they contributed. Like January hits, their seven grand's going in their IRA, their 8550s going in their HSA. They're not waiting till next year, April 15th, to drop the money. And you've lost like 16 months of investment growth in a tax free for Roth and tax free for HSA coming out for medical manner. So you need to change your thinking there. Yes. Because we're talking about growing and building wealth in a tax efficient manner. Um, but for those of you that are late to the game, it is a huge tip. You got until April 15th.

Mark J. Kohler:

Yep, yep. Now, eligibility. So you have until April 15th to do it. You know the number, and your AGI doesn't mater at all. You could be Warren Buffett could do, well, he's over the age 65 now, but any income level does not Elon Musk, you could do an HSA contribution. Okay. The next issue is how am I how do I get eligible to do this? Well, the first issue is you have to have a high deductible qualifying plan. Um, sometimes they're referred to as I've got the little high deductible health plan. Yeah, yeah. There's all these little acronyms out there. The reality is when you get into it technically, though, there's five or six, and there's actually under Obamacare this 10-point checklist of what qualifies as a HSA qualifying plan. And it's good stuff, it's easy stuff, you know, it's got basic um doctor visit um protocol and and deductible amounts and this and that. But it's generally going to be a high deductible plan, and that's gonna be at least $1,650 if you're single or $3,300 if you're married or had a household. Now that would normally be a high deductible. But again, 80% of people never even tap into their deductible because they don't go to the doctor. So have a reality check. And if you did have a bad situation, you got the insurance there for it. So point being, November 1st is your an open enrollment for any of you entrepreneurs out there. Some of you may have had a different enrollment period with your day job. That's fine. Stand up and go, whoa, whoa, whoa, I want to hide it up, I want a qualifying uh HSA plan. And you get to select that on your little enrollment form. But for you entrepreneurs out there, between November 1st and to and January 15th, you've got to you got a choice. And and I would recommend that you choose that qualifying plan.

Mat Sorensen:

Here's another thing to keep in mind. If we're talking about a 2025 contribution, you need a high deductible health plan for 2025. Yeah. Okay. So we're talking about putting that contribution in. Now, there is something called the there's like the last month rule. Okay. For any of you that may have been switching plans, maybe you had a change of employer or a cause where you've changed plans through the year.

Mark J. Kohler:

Good call.

Mat Sorensen:

Um, there is something called the last month rule that says if you've moved to a high deductible plan, as long as you did it before December 1st of 2025, you can get contributions in for the full amount of the year. You don't have to prorate it. There's some proration rule. Um, but if you if this is a new plan and you get it set up again before December 1st, you can still make the full 8550 family or 4,300 single contribution for 2025.

Mark J. Kohler:

And it's a great point. And that by the many of you listening to this are gonna have well over 30 days to jump on that. And you might be able to make a transition. And if for those of you that have your healthcare through an employer, call HR. Say, hey, can I change my plan? You know, what is it? Well, it's gonna cost you $100, or it's gonna cost you, I don't care. Get me in there. And I want that plan effective before December 1st and unlock this write-off. Okay, a couple other technical points. If you're age 55 to 65, you can put in $1,000 more. And under the one big beautiful bill, they changed that provision because you had to have individual plans to do that. Now, if you're in a married plan, it says if uh where both are over 55. Both are over 55, you don't have to have single plans to do it.

Mat Sorensen:

Yeah, and you're gonna put two grand in. Yep, two grand family. Because that used to be our strategy when we said, well, when you're both over 55, let's do both do individual plans because you both get the thousand. And that was kind of clunky. So the one big beautiful bill fixed that. So you can just go family, but you get the extra 2,000 now, so it adds up to just the same.

Mark J. Kohler:

See again, guys, that's that's ten thousand five hundred and fifty dollars is a couple to put away for future healthcare. And again, you start doing the math on that of a 10 or 15% return or XRP from last year, a 300% return, which is insane. But for you Bitcoin believers out there, you may say, you know what, 10 grand, you're popping 10 grand into Bitcoin every year anyway. At least if you're a Bitcoin believer, do it in your HSA. Yeah, just let it ride there. Let it ride. Yeah. But once you turn to age 65, you can't do new contributions, but you can continue to invest. Use that HSA ATM all you want. But once you have Medicare, you can't put new contributions in. That's it. I mean, technically, I can't think of anything else that's real earth-shattering.

Mat Sorensen:

Yeah, I mean, that's the HSA. Keep in mind there's different HSA accounts out there. There's like the bank that will set up your HSA, or maybe your employer where you work, is like we have an HSA partner we provide, and then you're freaking putting your money in a savings account and you're getting nothing on it. By the way, if you have an employer that funds an HSA, you could move that HSA balance to any HSA provider. You could move it to Fidelity, you could move it here to directed IRA to do these alternative assets we've talked about, whether that's real estate or a startup or crypto or oil and gas, whatever you're into. I mean, these are things that your HSA can invest in and own here at directed IRA. And so you've got the kind of the bank, you got the broker dealers out there that'll let you buy stock, and then you got the self-directed HSA, which is what we do and offer, where you have open architecture, invest in everyone, buy a mutual fund if you want here and you don't know what to do. Invest in crypto, like Mark said, if as an example, if that's what you're in and you believe in and you're investing in it, anyways, why not do it in a tax-free manner that's gonna pay for your medical over your lifetime? So um, huge opportunity here to utilize this account. We want to make sure more and more people have knowledge about this, how powerful it can be, and how you can grow it over time.

Mark J. Kohler:

Love it. Now, um, let's go through steps for a moment. And I want to clarify something again. You're you don't set up your HSA with your health insurance company. They're two different things. So just make sure you have the health insurance. In fact, when you make your application to open an HSA at directed IRA, we have one little box. Do you have a qualifying health care plan? Yes. Done. We don't need a copy of it. We're not the, you know, health insurance police. We're not sending someone out to look at your plan. I don't need to see your healthcare card, whatever the hell. You're checking a box. I have a qualifying plan. The end. So, anyway, step one, make sure you have the right insurance. Step two, you would then go open your HSA at these different options that Mat just talked about. If you come to directed IRA, I'd like to point out you have really two avenues. We have a crypto HSA, so you can immediately have an app on your phone at Gemini within 48 hours. You're buying crypto if you want. Option two is you set up a generally self-directed HSA, which we just did the panels at all asset summit were insane. These guys that have been doing real estate deals inside their Roth IRAs who started with five grand in an HSA. I mean, in a Roth IRA and then blew them up to over $10 million and more. It was an incredible panel.

Mat Sorensen:

One over a hundred million.

Mark J. Kohler:

It was nuts. So don't feel like you have to have a lot of money to get some inertia going. Get the HSA opened in a standard self-directed HSA. Make it a part, and you're in your next real estate deal. Put it in an LLC with your family's other HSAs. You can and get invest in anything you feel excited about and comfortable with, and that's it. You're off to the races. Um, I guess there was a step of funding it. So you open the account, put the money in, and then you're off to the races. Yeah. Uh Patty and I took our two HSAs and formed an LLC called Color Brick Cattle Company. And you can go to the website, ColorBrick Cattle.com, and we have 20 cows for sale. No, no, no. We have 23 in the herd. We're only selling about nine grass-fed, hormone-free uh Maha cows in our Utah ranch uh this coming spring. And our HSA owns the whole herd, and we put them on another rancher's property, so it's not prohibited. And I don't go out and feed the cows. I mean, I'm what's wrong? I have fun, you know, yeah, petting them.

Mat Sorensen:

Yeah, yeah.

Mark J. Kohler:

I can only pet one.

Mat Sorensen:

You're adding zero value to when you do that.

Mark J. Kohler:

Oh, yeah. I probably detract from the operation. Yeah.

Mat Sorensen:

So there are some rules called primitive transaction rules when you're buying real estate or other alternative assets where you keep how much you can be involved with the assets. So we've got this is what the directory podcast is all about. We got lots of education and training if you're new to that topic. So um, but yeah, I mean, I think the the big takeaway here is it's open enrollment time. If you're watching this as this video is coming out new, it's a great time to be thinking about should I be moving to an HSA qualifying plan? How does the HSA actually work? How does this benefit me today? Guys, you're saving money on taxes now. You're investing in a tax-preferred manner, and you can invest in the things that you know and believe in. I mean, we're not just talking about putting in a savings account, getting nothing, or investing in the stock market, which you may be already over-allocated to.

Mark J. Kohler:

We could even do gold.

Mat Sorensen:

You could buy precious metals.

Mark J. Kohler:

We had a great speaker. That guy was smart.

Mat Sorensen:

Yes, he was very smart. And we've been seeing a lot more clients investing in gold. Gold's been on a run, of course, right? It's over, it's like $4,300 an ounce now for gold that's uh outperformed the stock market. So uh so, but that's the thing here. It's like we're not telling you what to invest in. We're throwing out all these different things. We're just saying whatever you know and believe in, right? This is you, your retirement account, and Hilt Saves account, that you decide how to invest, and you're the one benefiting from it in the end.

Mark J. Kohler:

Okay, one last technical point I'll say is once the account is up and going, let's say you build it and you want the money out, you would sell whatever proportion of that investment was in the HSA account, whatever, bring it back to US dollars, and then you would say, I want to make a withdrawal. And this is where the bank HSAs of the world make it easy. They might give you like an HSA visa and things like that. Here at directed IRA, you would say, I want to make a withdrawal, and you'd fill out a form, it's all on the website in your portal, and you'd say, and you we don't need to see your bank, your healthcare receipts. You just total them up and say, This is my reimbursement amount, and we freaking ACH you the money, essentially. Um, you can request it different ways. Now, here's what you can do. If you're in a married plan, you can pull out any expense for either of your medical costs. Go to IRS Publication 502, it'll tell you all the things that are allowed. It'll blow your mind so much. Um, if you're head of household, single mom, single dad, any of your kids that are dependents of yours, you can pay for their medical too. That's great. But once your kids are not dependents anymore, they can open their own damn HSA. Sorry, did I say the word damn? Okay, so help them open their own HSA. But um, while they're dependents, it's a family HSA. Keep that concept out there. And then uh once they are off your tax return, they can open their own. And I guess again, that's it's really it's just self-managed as part of it.

Mat Sorensen:

And by the way, you can say damn all you want. When you're on the damn tour and I'm your damn tour guide, yeah, that's right. You know, you can say that all you want.

Mark J. Kohler:

Yeah, that's right. The the Idaho Dam race every year from the Teton Dam. That's that's another one. That's a good one. There are other things.

Mat Sorensen:

Wasn't that like a uh wasn't that like a National Lampoons? I think that was like Vegas vacation where they go on the dam tour with the damn tour guide. It's Cooper Dam.

Mark J. Kohler:

Oh, that was awesome. Anyways. Well, thanks everybody for listening today. We hope this has again expanded your knowledge to better help you better live your American dream. Grateful that you're here, a part of this podcast. Please share it with your friends and family, help them catch the dream of self-directing as well. And don't forget our sister podcast, the Main Street Business Podcast, where we go deep on the all of these small business tax strategies. The HSA is this fun one that kind of lives in both worlds. So we're excited for this podcast today. But see you next week. Give us a five-star thumbs up, high five, whatever, and appreciate you. And we'll uh see you next week. And thank you everyone for listening. A quick disclaimer and reminder this presentation does not constitute an attorney or CPA client relationship, and it is always in your best interest to consult competent legal and tax professionals when conducting your own personal transactions.

Mat Sorensen:

We also want to make sure you know this is not investment advice or financial advice. We're just trying to give you education, ideas, and strategies you can take to your professionals or conduct your own research on. We'll see you next time.