Financial advisors offer many types of advice to customers, but they generally agree that one of the best things people can do is invest as much as possible in tax-deferred retirement plans. Not only are the earnings from these investments exempt from income tax (until retirement), but the investment itself is tax-exempt. This means that if a person invests, say, $10,000 of his $100,000 income in a tax-deferred retirement plan, he pays income tax that year on only $90,000 of his income. This is probably the best method available to most people for avoiding tax payments. However, which group takes advantage of this attractive investment opportunity: everyone, people with low salaries, people with high salaries, or who?
The file Retirement Plan.xlsx lets you investigate this question. It contains data on 194 (hypothetical) couples: number of dependent children, combined annual salary of husband and wife, current mortgage on home, average amount of other (nonmortgage) debt, and percentage of combined income invested in tax-deferred retirement plans (assumed to be limited to 15%, which is realistic). Using correlations, scatter plots, and regression analysis, what can you conclude about the tendency of this group of people to invest in tax-deferred retirement plans?