When you make before-tax contributions to the 401(k) Plan, you won’t pay federal income taxes and, in most cases, state income tax, on the money in your account until you take it out — usually, when you’re retired. You may be in a different tax bracket then and pay less taxes than you would now. (Social Security and/or Medicare taxes still apply.)
Roth After-Tax Contributions
The 401(k) Plan also has the option to make Roth after-tax contributions. Generally, if you meet certain requirements, investment earnings on Roth after-tax contributions are not taxed when you take your money out — usually, when you’re retired.