Let's try with some numbers. First, let's invest $1000 post-tax, for a number of years, where we end up doubling (getting 200%) return on investment after a nu

Let's try with some numbers. First, let's invest $1000 post-tax, for a number of years, where we end up doubling (getting 200%) return on investment after a number of years.. Assume tax is 25%. So you are investing $750. Your return on investment is $1500, but that get's taxed at 25%, so you actually are getting $1125. Add that to your original $750 investment, and you have a total of $1875. Now let's do this pre-tax money (401k). $1000 invested, with 200% return, gives you $2000 profit, or $3000 with the initial investment. Now take 25% tax out of that 3000, you end up with $2250 at the end. So you get a total of $375 advantage with the 401k route. Oh, and during retirement, you will most likely live on a reduced gross income (you aren't paying FICA, your house is paid for already, and you also [might] get social security income). Which means, with our graduated tax system, your overall tax rate is less then, for an even better tax savings (you only pay taxes on the amount of 401k that you withdraw each year).