In this interview, CPA‑lawyer and author Mark Kohler explains how anyone, regardless of income, can use a Roth IRA to invest tax‑free, emphasizing the backdoor conversion method that bypasses income limits. He outlines the annual contribution caps for Roth IRAs, 401(k)s, HSAs, and ESAs, and shows how the modest yearly contributions can snowball into massive balances when invested in high‑return, non‑traditional assets. Kohler details the wide range of investments permissible inside retirement accounts—including real‑estate, LLC‑structured rental properties, cryptocurrency mining operations, cattle ranching, restaurants, and development projects—while noting the only prohibited holdings (collectibles and life‑insurance policies). He discusses the tax implications of operating businesses within a Roth, such as Unrelated Business Income Tax (UBIT) and Unrelated Debt‑Financed Income (UDFI), and explains when these taxes apply. Real‑world examples illustrate how a $6‑7k annual contribution can grow to six‑figure or even hundred‑million‑dollar portfolios through strategic, high‑growth investments like Bitcoin, Dogecoin, and private equity deals. Kohler also stresses the importance of side‑hustles and entrepreneurship for building wealth and financial literacy across families. The conversation concludes with a call to action for listeners to explore Roth backdoor strategies, diversify their retirement holdings, and consider entrepreneurial ventures as a safety net and growth engine.
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Alright, alright. Welcome back to the Investment Fund Secrets show. Today we got with us a fantastic guest, Mark Kohler. Mark is a best-selling author. He's got— your show on YouTube is absolutely insane. It's just the Mark J. Kohler channel on YouTube. Got over 100,000 subscribers there talking about real estate, taxes, all that kind of stuff. He's a CPA, he's a lawyer, a best-selling author and speaker around the country. You've been on CNBC, a bunch of other news outlets and stations. Mark's the real deal and we're excited to have you on the show. Mark, welcome on. Mark, give us a brief background on you. I want to hear your story, how you got into this game and started with your shows and podcasts, all those sorts of stuff.
You bet. And I'm going to say this too. So someone who goes, well, I'm not going to listen to this. I just want to add to Bridger's point first before I introduce myself. Anybody at any age and any income Can have a Roth IRA, and I swear it freaking drives me nuts how many CPAs around the country and some of you listening today have heard well you make too much money to have a Roth. Bullcrap! There's a way around it, and we're going to talk about it. And you can have a 401k at work and a Roth on the side. I want your kids to have Roths. I want your mom to have Roths. I want your spouse to have Roth. You're going to love this, folks. So hang tight. It really is a secret that Wall Street's not. Too thrilled about, and you're going to love this backdoor strategy. Okay, so here's the magic. This is going to— I just want to give you a few ideas, everybody. Of course, you can buy real estate with your IRA, 401, and I'm not talking about a REIT. I'm talking about you can get into a fund, you can engage in a PPM, you could create your own LLC, you could buy a rental property next to your grandma, you can buy rental property inside your IRA, your Your SEP, your 401, your Roth, your HSA, your ESA, all the above. Most professionals kind of have heard that at least. Where it gets exciting is that's just the tip of the iceberg. So we've got clients, and personally, I'm going to give some of my fun pet projects. For example, I have a little rental property in South Chicago. It's low-income housing, guaranteed Section 8 rent. I've got it in my health savings account. Tax-free. Just goes to my health savings account. I can take money out of that anytime to pay for my family's healthcare. I could sell the property tax-free and it goes right into my HSA. Next, I've got a crypto mine in my Roth right now. So freaking cool. I could pull up my little NiceHash app right now and show you, but I'm mining in my Roth. This was earlier this year. I'm late to the game. We've been helping clients buy Bitcoin 5 years ago and we thought they were nuts until they became billionaires. And so he finally caught on. But anyway, so my Roth opened an LLC. It's a 2-tier structure. We could get into the intricacies of that with mining and holding crypto. But my— I took $10,000 out of my Roth IRA, formed an LLC, bought 3 graphics cards. I've got my hash rates down and I'm mining Bitcoin, making about an 85% return. I've got this one last month, Bridger. You're going to love this. So this is also a sister— my HSA has 2 LLCs. Now I bought cattle. What? I bought cattle. Cows. I bought cows. And so I buy— so I'm out here in Idaho and these ranchers are buying cows, holding them through the winter or the summer in the pasture, and they sell them off. And if you can— and so I found a rancher that's like, yeah, I'll throw them in with my herd. And so now when I go to the grocery store, Bridger, people are like, how's your herd?
You got some— you got a little bit of cred in Idaho now?
Yeah. Got some cattle. Yeah. So I only bought 5. I did that deal for about $12,000. But these are fun. I mean, I've got investments that are 6-figure-plus, right? But, but these are fun. And you can do that. And I have clients that are doing developments, have $100 million in their Roth IRA. This isn't just Mitt Romney. This is— or Peter Thiel or Mohnish Pabrai. This is legit. And so those are— but you can buy into a restaurant, you can buy developments.
And so is there— there's, there's It doesn't sound like there's a restriction on what you can invest into out of your Roth IRA. Is that correct?
You cannot buy collectibles. So that's one rule. So you can't buy collector cars.
So even like baseball cards, that's a huge rave right now, Pokémon cards, stuff like that.
Yeah, can't do that in a Roth. So no collectibles. Um, now I flipped trucks and flipped cars and flipped houses in retirement accounts, but you can't buy and hold a collected type item. Next, and the only other one, is you cannot buy life insurance with a retirement account. And that's it. Everything else is fair game. Now you have a couple taxes. You have UDFI and UBIT tax. And those mean that if you're going to be in an operational business like a restaurant, your Roth might pay some tax to level the playing field with other operational businesses. But if it's a passive investment, you're not in the business of ranching, you're not in the business of mining, It's passive. Okay.
So, well, and this is where the questions come up is a Roth IRA. I don't know that you know it, but the metric of every year you can only contribute, it's like $60,000 or whatever, $40,000 a year. What is the number?
Okay. All right. So, here's the math.
Yeah. Let's walk us through because then how do you get to $100 million, right? If you can only contribute that amount each year, how do I end up with a $100 million chunk of change in there if I'm limited at $100,000 a year, whatever the limit is?
Okay. You bet. All right, so think of it like a Monopoly board. Every time you pass go, you get $200. Well, a Roth IRA or traditional IRA or even a 401 is like that. There's different numbers, but every time you pass December 31st, you can put in new money for the new year, right? And of course, there's, you know, you have to sometimes the April 15th extension date and this and that employer, you know, deadlines. But for the most part, right, every year The clock starts over, and this year you can put up to six grand in a Roth IRA, in the individual Roth IRA, seven grand if you're age fifty or older. You've got the 401k at nineteen five. You've got education savings accounts for your kids at two grand. So all these to have different numbers every time you pass go. So every time I pass January first, I can put in more money. Well, what do I invest in next? Am I going to just buy into a mutual fund or an ETF where I make 6, 7, 8, 10, 12, 15%? All right, that's cool. Maybe I have some inside knowledge or some industry knowledge that I can choose the right type of fund. I find a great fund manager, but maybe I want to invest that IRA into a project that has a bigger, a greater metric. For example, it could be a development where I tie up some land on the side of a freeway. With my Roth for $10,000 on an option contract, and then it participates in the ultimate development and makes $1 million. Well, next year when I pass go, I can still put in my $6,000, but that Roth may have made $900,000, $500,000 along the way. Now, for example, let's just think of Bitcoin— I mean, not Bitcoin, cryptocurrency is a great example because we've all been seeing the activity. It's up and down, it's risky, I get it, but it's a good example, and it's I mean, Visa's now providing a debit card to buy things with Bitcoin. All the banks are investing. We know it's here to stay. So Dogecoin, if you would have bought $7,000 worth of Dogecoin, and there's all sorts of, you know, great ways to do the math on this and websites that provide some of the examples. But if you bought Dogecoin for about 7 grand last September 2020, In May, when it was hitting its high, it would have been worth a million bucks. So I could have put seven grand in my Roth IRA, opened up an exchange with a wallet, bought seven grand of Doge, and then boom! It's worth a million bucks the next year. Now that could be a real estate project. That could be a patent. That could be a mine. That could be real estate. I mean, it could be anything that you might know. Invest in what you freaking know. And so, if cryptocurrency is what you know, cool. And so, the return is not limited, Bridger. It's just the annual contribution. So, I can put in my 6 grand every year, but whatever the hell I invest in, sky's the limit.
So, let's get the Dogecoin example. You have a million-dollar account now. Can you— now, if I sold at the peak, right? I just Great timing. I sold. Now I have, you know, cash, $100,000. Is that— now, what's the tax liability? Does that have to stay in the Roth IRA and then I can reinvest it and it still is— that whole account is— there's no tax on that entire account forever?
Forever.
Forever.
Tax-free.
Tax-free.
So you got a million dollars sitting. Now let's say you exited your Dogecoin and you went to what's called fiat currency, what you would have bought in with. If you were in England, it may have been pounds, or Japan, it could have been the yen, or whatever. But you get your— you cash out on your Dogecoin, you got a million dollars now sitting in your Roth. What are you gonna do? Oh, maybe now I'll buy an apartment building in Oklahoma, or I'm gonna go buy into another fund, or I might— oh, there's a startup that I'm really interested. Peter Thiel started PayPal— is one of the investors in PayPal— used his Roth IRA. $100 grand, now worth over $100 million. Story after story. Mitt Romney would put his Roth in the deals with his Bain Capital print takeovers. So when they put together a project in Boston to go take over a company and clean house, they'd form an LLC, right? They get investors, they're like, hey everybody, listen. He's like, I'm gonna throw my Roth in here for $50 grand, $100 grand. They're That thing starts to freaking snowball. Now you can invest it in whatever the hell you want.
I love it. You've teased the backdoor method to get into this.
Did you—
is that what you just touched on, or is there— what? Let's get into that. I want to hear it.
So the general—
it's just a great name too, the backdoor method. I want— I got to get into that. We got to talk about it.
I mean, everybody wants to go in the back door, right?
Oh yeah.
Okay, so let's say the Roth— and it's true, I think the Roth is a big party. Everybody wants to go to the frat house. That's the Roth frat house. We want to go to that party. Well, to get into the front door of a Roth, you can't make more than— it's right here. And so my little— oh, I've got it right here. I'll tell you right now. So this is my Mark Kohler MJK 2021 calendar. It's in its second year, sold out. We'll be doing another one at the end of this year for 2022. So inside I have this little table so everybody, small business owners, can look at, look at the rules. Okay. If I want to put money in a Roth, There's a phase-out. If you make more than $140,000 single, government says you can't put money in a Roth. If you make more than $208,000 married filing joint, you can't put money in a Roth. And 90% of CPAs stop there. And some of you listening are like, well, Mark, you're full of crap. My accountant says because I make more than $200 grand, I can't put money in a Roth. That's the front door, people. There's a back door.
Gotcha.
And I want you to go around to the back door and, hey, I want into the party. And they'll say, do you have a traditional IRA? Yeah or no? Maybe. So, what you do is you make a non-deductible contribution to a traditional IRA, which none of us would ever do. I don't want to make a non-deductible contribution to an IRA because I make too much money. That's stupid. I did because half of the equation is getting the deduction on the front end and the tax-deferred growth, and I pay tax on the way out. So why would I ever make a non-deductible traditional contribution? Because then all I get is tax-deferred. It's stupid. But if you make a non-deductible IRA contribution, and you can do it at any income level, on day 2 you can convert it to Roth. So really, the conversion is my backdoor in.
Huh.
So if you make more than $200 grand, you, your wife, me, I every year I do my $6,000 or $7,000. I turned 51 last year. It was pretty depressing, Bridger. Okay, so anyway, I make my $6,000 contribution into a non-deductible traditional, and your financial advisor's scratching their head because they're freaking idiots. And then on day 2, you convert it to Roth. You're in the party, baby.
Wow. So Mark, last question I want to leave our audience with. If you had one thing you wanted to leave with this audience, what would that be?
All right. Bigfoot lives. No, I'm just joking.
Okay.
A lot of people say it's too risky to start a small business, to start a little rental property on the side. Or Mark, I make enough money. I don't need to chase that little side hustle, side gig thing. It's not worth it. I say it's too risky not to. Why not start passing on the education of entrepreneurship to your family, to your loved ones, and use it as a tool to fund all these types of accounts, to teach your family about financial literacy, to learn more yourself? And maybe, just maybe, you get up in the morning going, oh my gosh, I am so excited about this little side gig. Side hustle that's making more money than you imagined, or it's a safety net. Who knows, maybe there could be some crazy world pandemic and your job is put on the line. Do you have something to fall back on? Is it real estate? Is it a Main Street type business? Is it a service business? Is consulting— get your family involved. Don't give up on the American dream. 40% of Americans now have a side hustle, a side gig. That's a business. I'm talking writing off home office, cell phone, dining, travel, equipment, vehicles—you name it. I could just start going around my office talking about all the write-offs I pay for in here. Get that separate business set up, respect it, and use it as a tool. I need a pen. Let me let me do the pen drop. Boom!
There it is, Mark. We've loved having you on. Thank you again. DirectedIRA.com. You can go learn more about Mark's stuff, his company, his podcast, his show, everything. Go check out his YouTube channel as well. Go get subscribed to them. I know they put out great content there as well. Mark, I want to thank you again for coming on. It's been a pleasure to have you.
Oh, thanks, Bridger. Any of those topics, you put me in the rotation. Maybe in 6 months when everybody's forgotten about me and they're not sick of me, bring me back. Any of those topics we could dive deeper on, I love it. Thanks for having me. You have a great podcast.
Yeah, I know. We actually will need to bring— we could have talked for another couple hours here with all the plethora of knowledge you have. So, Mark, thank you guys again. Go check out our show. Check out his website as well. And we'll see you guys in the next episode. Bye.
