Your therapy practice is earning a steady profit, and you have enough savings set aside that it’s time to start thinking about how to make your money work for you.

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You want to turn your income into wealth. So what’s the best way to invest your hard-earned cash?

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These five investment strategies for self-employed therapists can help you plan for the future, protect your practice, and even lower your tax bill. Here’s how.

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Before you start investing

Making smart investments takes careful planning. Before you start investing extra profit and savings from your practice:

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• Create an investment budget
• Identify your investment
• Build an investment timeline
• Consult with a financial professional

Create an investment budget

How much can you afford to withhold from your income to invest? How much can you expect to earn from your investments over time? How much of your investment profits will you invest back into your practice as working capital?

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Your investment budget sets clear limits and expectations, and ensures your goals as an investor harmonize with your goals as a business owner. 

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For more info, check out How to Create a Budget for Your Therapy Practice.

Identify your investment goals

What are you hoping to achieve with your investments?

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You may be planning to:

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• Lower your tax bill
• Establish an extra income stream
• Grow funds that would otherwise be sitting idle
• Prepare for retirement
• Protect your business in case of unforeseen events

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Taking time to write down what you hope to achieve will make future investment decisions more straightforward.

Build an investment timeline

If your goal is to earn extra income from your investments, how much do you hope to earn in one year? Five years?

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If you plan to tie up funds in a financial instrument like a bond, what is the maturity date?

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And how will your investments affect your personal finances? Your practice’s finances?

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Building out a timeline is essential. It may help to plan visually, sketching out a literal line stretching into the future, and matching them up with your financial projections.

Consult with a financial professional 

Your CPA may be able to advise you on certain aspects of investing as it relates to tax savings. Where they’re unable to offer direct advice, they should be willing to refer you to a reliable financial advisor or Certified Financial Planner (CFP) to help you plan how to make your money work for you.

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Reading articles about investment strategies can help you get the lay of the land and make preliminary plans for investing. But before you make any decisions that could impact you financially, get one-on-one help from a pro.

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Max out your retirement contributions

Putting cash away for retirement has the potential to both reduce your overall tax burden and plan for the future. And if you have extra savings, it’s the first option to consider.

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When you contribute cash to a retirement fund, you either pay income tax on the funds later (when you withdraw them, so your tax bill is lowered in the present) or immediately (when you contribute them, so your tax bill is lowered in the future).

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Generally speaking, if you expect to be in a lower tax bracket after you retire than you are now, it makes sense to defer income tax until then. If you expect to be in a higher tax bracket when you retire, on the other hand, it makes sense to pay income tax now on contributions and withdraw the funds tax free later.

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There are two categories of income funds appropriate for self-employed therapists: Individual Retirement Accounts (IRAs) and 401(k)s. Each comes with different annual limits on how much you can contribute, and each category has a variety of subtypes which are taxed differently. 

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For the full rundown, check out our guide to retirement funds for therapists.

What does it mean when you “max out” your retirement funds?

There’s a limit on how much you can contribute to each type of retirement fund each year. When you’ve reached the limit on every type of retirement fund you have, then you’ve maxed them out.

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The limits change from one year to the next, and depend on your age (individuals aged 50 or older have higher limits). 

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As a rough guide:

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Note that employers may also contribute to employees’ 401(k)s. If you’re an employee of your own practice (that is, if you have an S corp therapy practice) you may withhold a certain amount from your paycheck while your business also contributes funds.

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Following the table above, the maximum amount you could contribute in 2024 is $76,000.

Why invest in retirement funds?

Retirement funds are not exciting. Don’t expect the breakneck pace or dramatic reversals of the trading floor. The biggest thrill you can expect from investing in retirement funds is a lowered tax bill and visions of a cozy nest egg.

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It’s because they’re boring that retirement funds are such a good use of your excess income or savings. They help you plan for the future, while freeing up some financial leeway in the present; less money spent on income tax is more money you can reinvest in your practice. 

Set up an HSA

A health savings account (HSA) allows you to enjoy beneficial tax treatment (funds you contribute are tax-free) while setting aside cash to cover medical expenses.

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You can only open an HSA if you already have a high deductible health plan (HDHP), have no other medical coverage, and are not enrolled in Medicare. HSAs are not available to people claimed as dependents on others’ tax returns.

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The money you save in an HSA can be used to cover medical, dental, and vision care, as well as the cost of prescription drugs.

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All funds you contribute to an HSA vests, meaning it carries ahead to the next year. There’s no requirement to withdraw money you contribute in the same year you contribute it.

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There are annual limits on HSA contributions. The limits change each year.

What is an HDHP? 

In this case, an HDHP is any health plan with a minimum annual deductible of $1,600 (individuals) or $3,200 (families) for the 2024 tax year. 

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For the 2025 tax year, those limits are $1,650 (individuals) and $3,300 (families) respectively.

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An HDHP must also have an annual out-of-pocket limit of $8,050 (individuals) or $16,100 (families) for the 2024 tax year. 

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For the 2025 tax year, those limits are $8,350 (individuals) or $16,600 (families) for the 2025 tax year.

How do you open an HSA?

The insurance company responsible for your HDHP may offer HSAs. Otherwise, you can open an HSA through a bank or insurance brokerage.

What are the HSA contribution limits?

You can contribute up to $4,150 (individual) or $8,300 (family) tax-free for the 2024 tax year. For the 2025 tax year, those limits are $4,300 (individual) and $8,550 (family), respectively. 

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Any contributions beyond that limit are taxed at your normal income tax rate and subject to an additional 6% HSA tax.

Why is an HSA a good investment for therapists?

As a self-employed therapist, you’re responsible for your own health insurance and additional health expenses. An HSA helps cover the deductible in the event you need medical care, and can act as a cushion in the event of unforeseen medical expenses.

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In a word, it’s money you would be spending anyway on medical expenses—but because you contribute it to an HSA, you lower your tax bill. If you qualify for an HSA, it’s your best first-stop investment after retirement accounts.

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This is just a short overview of HSAs. There are multiple ways to save money when you set up an HSA as a self-employed therapist, particularly if your practice is an S corp. For more info, check out our Complete Guide to HSAs for Therapists.

Invest in real estate

The barrier to entry may be higher than other types of investment—it might take some time to save up for a downpayment—but real estate can yield a significant return in the long run. 

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Be prepared to do your research, free up some hours in your schedule, and hire professionals when needed. Buying real estate—and renting it to individuals or businesses—is no casual undertaking. 

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That being said, it may end up being the perfect sideline while you run your therapy practice.

Buying (and renting out) your office space

Owning your own office space not only has the potential to reduce your monthly expenses (mortgage payments being smaller, ideally, than rent payments), but it opens up the opportunity to earn income by renting extra space to other professionals.

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If you do go this route, consider renting your extra space to other therapists. A single room (plus amenities) may be able to serve two or three therapists serving a mixture of in-person and remote clients.

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But your commercial real estate investments don’t need to be picture-perfect therapists’ offices. If you end up buying a larger space and only using a portion of it, you may be able to rent it out for seminars, group therapy, or other therapy-related pursuits requiring a venue.

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Check out our interview with therapist Jeff Guenther for Heard Business School, where we discuss the realities of renting out office space to other therapists.

Buying commercial apartments 

Buying apartments (or a house) and becoming a landlord comes with a host of complications, and may be an option best left until after you’ve already found a way to buy your own office space.

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Still, with the right support—from a property management company, for instance, or an on-site caretaker—residential rentals could become a lucrative side business. Be sure to talk to your accountant before making any major decisions.

Buying a vacation rental

If your area is a hot (or even an up-and-coming) location for seasonal travelers, owning a vacation rental property could earn you extra income while freeing you from the potential headaches of working with long-term renters.

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There are even companies specializing in managing vacation rentals for owners. Just keep in mind that any extra help you hire will cut into your bottom line. 

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And keep an eye on the news. Some jurisdictions have begun banning or limiting the activities of Airbnbs. If that’s a possibility where you live, make sure to have a backup plan for your investment property.

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Open a high yield savings account

Running your own therapy practice can be unpredictable. If you’ve struggled in the past with ups and downs in your income stream, you already know how important it is to have savings—a rainy day fund that helps cover the essentials when cash is short. And opening a high yield savings account (HYSA) can help your savings grow while ensuring you still have access to funds. 

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An average everyday savings account yields returns of just 0.46%, while some HYSAs on the market advertise interest rates of up to 5%.

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It’s not exactly the most thrilling investment—don’t expect huge returns—but an HYSA is a low-risk way to keep your money working for you while it’s in a savings account.

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Before settling on an HYSA, do your research. There are many HYSAs currently being offered by online banks and fintech firms that are relatively new to the market. Always read the fine print and, if you’re unsure, get professional advice before you move your money.

HYSA pros and cons

Pros

• High interest rates keep your money working for you
• You still have access to your funds, and can make withdrawals without penalties
• Many accounts charge no fees and require no minimum deposit

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Cons

• Rates fluctuate due to changing economic factors (like the Fed’s interest rate), so your earnings from interest may be hard to anticipate
• Most providers lack brick-and-mortar locations, so you’ll exclusively be dealing with them online or over the phone
• There may be limits on how frequently you can withdraw or transfer funds
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Invest in other businesses through crowdfunding

If you’ve maxed out your retirement fund and your HSA, and you can afford to expose yourself to some risk with a “fun” investment, consider investing in other businesses.

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This type of investing is anything but passive: there are many different ways to earn returns on your income (equity models, debt models, and others); many different types of businesses to support (some with socially beneficial or cause-based missions); and plenty of research to be done.

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Crowdfunding investing gives you the chance to play the role of venture capitalist without gambling all your assets on risky ventures, and you could even earn a decent return on your investments. 

What is a crowdfunding platform?

For a long time, investing in other businesses was the preserve of the (relatively) wealthy. Even today, you need to be an accredited investor—with $1,000,000+ in the bank, and $200,000+ annual income—to buy shares in other businesses.

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That changed with the Jumpstart Our Businesses (JOBS) Act of 2012, which allowed non-accredited investors to invest in businesses via crowdfunding platforms.

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A crowdfunding platform acts as an intermediary between investors and businesses seeking startup capital. Effectively, by lumping together many small investments, crowdfunding platforms can buy company stock that would be too expensive for a non-accredited investor.

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There are many different crowdfunding investment platforms, some focused on funding specific sectors and types of companies. Do your research and, if necessary, get professional advice before signing up for a particular platform.

Questions to ask before investing

Before investing in a particular business, find out:

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• What their business plan is
• How the business is planning to spend the funds they raise
• What equity, debt, and liabilities the company holds
• What the state of their particular industry or niche is, and the company’s place in it
• What the biggest barriers to entry are for a new business in their industry
• How much cash the business needs to raise
• When you can expect to see a return on your investment
• What the company’s long-term mission and goals are
• If the company has a social mission, how they’re addressing issues in ways established businesses or nonprofits are not

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Crowdfunding platforms may also offer social features, or you may be able to find communities outside those platforms (e.g. Reddit). Take the opportunity to talk to other investors. 

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Learning about the businesses you invest in and having a personal stake in their success is part of what makes this type of investing fun.

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Looking for ways to diversify your sources of income? Investing is just one option. Check out our complete list of income streams for therapists.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

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Bryce Warnes is a West Coast writer specializing in small business finances.‍

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