“If you have a lemonade stand and make money from it, you have to give a portion to the government for taxes,” said Filip Telibasa, CFP, owner and planner at Benzina Wealth.

Putting part of your money into a 401(k) is a way to avoid paying taxes on the entire amount, at least right now, he said.

“By doing this, you avoid paying the taxes upfront and delay it way into the future when you stop working and close down the lemonade stand,” he said. “The idea is that when you no longer make money from the lemonade stand, your tax rate is much lower and therefore results in you giving less to the government.”

While the money is in your 401(k), he said it’s able to grow without having to pay annual taxes on it, creating a snowball effect that allows it to multiply faster.