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brob,
The main advantage of investing in your 401K is that you lower your the
taxable wages. So if you make 35K and you contribute a total of 2K to your
401K plan - then essentially you will only pay income tax on 33K of your
salary. You make an investment with the 2K and then when you withdraw, at
59.5, you will pay tax on any gains. It's not tax free. The IRS always
get's their share. If you don't kick up to the bosses then they send their
goons after you and then you will go to jail and end up some bad man's
girlfriend. But if you assume that what has happened forever will
continue to happen, you should make at least 8% return on your
investments. So it's like you get to borrow free money to make investment
and then you just have to share some of the returns with the government.
Sorry if it's a little unclear but I'm ill today. If you have any more
questions feel free to ask.
PS * Be sure to check this info with your tax or financial advisor. I made
no attempt to ensure this information is correct.
PSS Also read IRS Publication 525 on elective contributions to a retirement
plan to learn more about 401Ks.
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