<prompt> Human: Maybe this is too simple a question, but I cant seem to find a straight answer that makes sense to me:1. What is the long term tax benefit of contributing to a 401K?2. Why is the penalty for early withdrawal so steep?I understand that a typical 401K acts as a tax shelter, but even so you are taxed when you withdraw. Whats more, youre paying taxes on all the gains youve made. Even after all that you are penalized steeply for withdrawing your own money that you have paid taxes on before you are 59.5. Besides the case of your income taxes increasing as you become older because of raises, why wouldnt you just pay taxes on your income and leave some with an investor?  <response>: The penalty is high because as a tax shelter, 401ks are incredibly effective. At the extreme ends, you could be putting in money that otherwise would have been taxed at 40, then withdrawing it completely tax free or at as little as 10 tax rates. Also the government wants you to actually save the money for retirement so they dont have millions of broke-ass 70 year olds clamoring for higher social security. 