[MRM]

The short answer is yes. You put the money into your 401(k) pre-tax. It grows in the account without being taxed. Then, when you retire, all of the money you withdraw is taxed as ordinary income as you withdraw it.

The advantage is that you will probably have a lower tax rate when you are retired than you do now and you will be able to manage your income and taxes by withdrawing more or less as you need it. Of course you have some benefit of the investment returns not being taxed until you take it out, too.