The "number one" reason to defer is to help build your retirement assets.  

A 401(k) plan is an easy and convenient way for you to invest regularly for retirement.  Plus, contributing on a tax-deferred basis allows your money to grow at a much faster rate than a regular, taxable savings program you might start on your own.

Some plans have an added incentive.  Employee contributions are partially or fully "matched" by the employer.  The employer's matching contribution is also tax-deferred.

Listed below are two examples of why you should participate in your employer's 401(k) plan. (These examples do not take into account any employer matching contributions or profit sharing contributions.)

Example 1:

Employee age 25 starts deferring $100 each month into their employer's plan, and continues deferring the same amount for 15 years.  After 15 years, the employee stops deferring, but leaves the money in the 401(k) plan.  The employee's deferrals earn 8% interest annually.

At age 60, this employee has accumulated $132,211.

Example 2:

Employee age 35 starts deferring $100 each month into their employer's plan, and continues deferring the same amount for 25 years (age 60).  The employee's deferrals earn 8% interest annually.

At age 60, this employee has accumulated $90,899.

Note:  Not only do you want to participate, you want to start participating as early as possible.