There are some
taxes you will have to continue to pay whilst you are receiving these tax benefits for 401(k), these taxes are for unemployment, Social Security and Medicare. On the other hand if you are investing in 401(k) it will only take approximately $16,000 in pre-tax income. If this was the case you
would have much larger deficits than what there is today, you would have a nation of retired people living at or below the poverty line which in turns affects the economy and the social unrest within society. There is the offset that you do not have to pay any
income tax on your pre-tax contributions until you have withdraw your funds from your 401(k) plan, which hopefully is when you have retired. The government also provides for a tax deferral on any earnings you have made from your 401(k) investments until you withdraw from your 401(k) plan. The
reduction in your gross income from investing in to 401(k) has a follow on effect to all other government income taxes that are applied at the federal, state or local level. The odds are you are living in the right state as most states provide this benefit. If you live in the
right state, then they also may provide you with the benefit of not paying taxes on the contributions you make to 401(k). That's a big difference. . Income tax benefits are the incentives that the government is providing you whilst you have income earning capacity.
