Scenario 2: a single person with a $90,000 salary contributing 10% of their gross salary: Gross pay if paid twice per month ($90,000 per year): $3,750 Net pay if paid twice per month without a 401(k) contribution: $3,044.33 Net pay if paid twice per month WITH a $375 401(k] contribution: $2,753.99 Difference: $308.34 Pre-tax savings: $66.66 This individual's paycheck is only reduced by $308.34, even though they contributed $375.00, because they're paying tax on less income. The $66.66 difference represents the pre-tax savings. Tax Liability with 10% to 401(k) Tax Liability without 10% to 401(k) Reduced tax liability 401(k) Value