401(k) contributions are excluded from your taxable income unless you are contributing to a Roth account. This means your taxes on the money you contributed into your plan are deferred until retirement, giving you more income to invest and grow now. For example, if you contribute $5,000 to your retirement plan and your salary is $60,000 a year, you will only be taxed on $55,000.
You should also be aware that generally you are going to incur taxes AND additional taxes if you take money out of your 401(k) plan prior to reaching age 59 ½ and you haven’t experienced a ‘financial hardship’ that meets the distribution rules. Most retirement plan distributions are subject to income tax and may be subject to an additional 10% tax. If you are planning on taking a distribution, check to see if you are going to incur taxes and/or penalties beforehand. Read more at the IRS website.