You are generally permitted to contribute to your 401(k) plan based on the 2017 IRS limits: $18,000 per year for those under age 50 and $24,000 per year for those 50 years of age and older.
Most 401(k) plans offer the ability to make these contributions on a pre-tax basis only. Taxes on principal, interest, dividends and capital gains are deferred until you begin making withdrawals. Withdrawals are taxed at your federal and or states income tax rate(s) in the year of the withdrawal. You may be able to defer taxes when your income tax rate(s) are high by contributing on a pre-tax basis and take withdrawals when your income tax rate(s) are low, such as in retirement.
Next blog post will discuss Roth 401k contribution.