Tax-deferred retirement plans are designed to help all Americans save for retirement. In 2011, Americans will save (and Uncle Sam will lose) $142 billion in taxes by sheltering their personal income in 401(k) plans, pension plans and individual retirement accounts, according to the U.S. budget.
Since the wealthy have more to save, they tend to reap more of the tax benefits of saving for retirement.
According to the Tax Policy Center, the top 20 percent of income earners enjoy 80 percent of the tax write-offs for retirement saving while the bottom 60 percent take advantage of a whopping 7 percent of the tax savings.
Which is understandable considering that the higher your income, the more likely you are to own a 401(k) plan with generous employer contributions. Nearly half of all Americans do not have access to a retirement plan at work, and those who do can't afford to take full advantage of the tax incentive.
"It's, again, a question of targeting incentives," Hanlon says. "The tax benefits probably aren't as well-targeted as they should be. The wealthy probably would save regardless of the tax benefit."