Within the next month, the average American worker will likely see an estimated increase in their take home pay of $70 a paycheck, or $2,000 a year, due to tax reform. It’s anticipated that most Americans will immediately absorb the extra money as part of their normal budget spending; $70 per pay period could easily justify a nice dinner out or a new phone or cable upgrade for many individuals.

While these instant gratification upgrades are rewarding in the short-term, there are options for employees to consider that will make these extra dollars work harder and last longer. These extra funds can go a long way in helping to ensure financial stability; which is paramount to overall health.

Smart employers should help their employees consider how to make those hard-earned funds have a more meaningful long-term financial outcome by investing in health and financial benefits. Here are four ideas on what employees can do with the extra funds.

Increase 401(k) contributions. As employers know, 401(k) plans are a popular tool used to set aside money for retirement. They are traditionally tax-free and have high annual contribution limits, an $18,500 max in 2018, allowing employees to set aside money that will earn interest and compound over the years until they can withdraw. Employers who encourage employees to contribute an extra $70 per paycheck can have a huge impact over many years — particularly if there is an employer match involved.

Invest in the triple tax advantage of an HSA. Health savings accounts not only cover planned out-of-pocket costs, but allow users to be better prepared financially when an unexpected injury or illness comes along. In 2018, an individual can contribute a maximum of $3,450 to their HSA and a family can contribute a maximum of $6,900 with an additional $1,000 catch up contribution allowed for people 55 or older.

HSAs offer a number of tax advantages: HSAs offer tax benefits at deposit, during the account’s life and upon withdrawal for qualified medical expenses. Money contributed to an HSA can be rolled over from year-to-year; there is no “use it or lose it” clause. HSA money can be used on a variety of medical expenses, from doctor and dentist visits to vision-related and pharmacy expenses.

HSAs also can be used like traditional retirement accounts, with some working as simple savings accounts and others allowing employees to invest money in mutual funds, similar to a 401(k) or traditional IRA. After retirement age, individuals can use the HSA funds for non-medical expenses without paying any penalty and with similar taxation to withdrawals from other retirement savings accounts (e.g. 401(k)s). Earnings in invested HSA funds grow tax-free making your dollars stretch even further. HSAs can serve as a powerful tool for long-term savings and as a key part of an overall financial wellness strategy to build wealth for both medical and other general expenses. A 2017 Employee Benefits Research Institute study estimates some couples will need as much as $370,000 to cover out-of-pocket medical expenses during retirement.

Build an emergency fund. Building an emergency fund for unexpected costs is important to an overall financial wellness plan. In case of an unexpected event, it’s recommended that individuals have at least six months of income that can be lived on comfortably. This amount needs to account for everyday needs and expenses, such as monthly bills, including an individual’s rent or mortgage payments. While six months’ worth of money can seem like an unattainable amount, saving an extra $2,000 in an emergency fund this year is a great place to start. Employers should talk to employees about building an emergency fund during financial and retirement conversations.

Pay off debt. Depending on the type of debt accumulated, working toward paying off debt with these extra dollars could be a beneficial strategy. If an individual has high-interest consumer debt, it is always recommended to pay off that debt first. While making additional payments on traditional loan debts, like student loans or mortgages, will save money in the long run, it won’t lower monthly payments. By chipping away at high-interest debt, individuals can save money by cutting down on their interest payments.

When deciding how to utilize the extra take home pay from the 2017 Tax Reform Act, consider what will benefit you the most. Carefully evaluate your financial options, and then take action to avoid these extra dollars being absorbed into another bill payment or everyday living cost.

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