Who Takes Advantage of Tax-Deferred Savings Programs? Evidence from Federal Income Tax Data

This paper provides insight into the attributes of wage-earning households that participate in tax-deferred retirement savings plans. Examining data from federal tax returns, we find that approximately 52 percent of individuals and 55 percent of households participated in a retirement savings program in 1996. Excluding households with wages within the 1996 poverty thresholds and individuals under age 21 or over age 70, the age-wage restricted participation rates were 66 percent and 79 percent for individuals and households, respectively. Estimating probit equations, we find that households with a single-earner or having dependents are less likely to participate in a plan. Higher wage-earnings, non-labor income, and marginal tax rates tend to increase the probability of participation.