is 401k tax free
There's also a type of 401(k) plan called the Roth 401(k) , which offers a tax break that essentially acts as the reverse of the traditional 401(k) : You do have to pay tax on your contributions, but you won't have to pay any tax when you withdraw the money in retirement. So all the money in your account grows tax free.o if you make a small contribution to a 401(k), or if you increase your contribution by 1% or so a year, chances are you'll hardly even notice the difference in your pay checks, and your tax bill will be lower.