Recently via some second hand gossip I found out that one of my acquaintance has not saved for retirement. That may not sound like big news to you but it was a giant shock to me. The person in question is in her early 50's and married. Until recently they were living in a low cost city and making >$100k annual income. Another person we know quoted her as saying that "it was time she started thinking about retirement". Really? I asked, "started" thinking about retirement? Less than 15 years from retirement age? Yes. Apparently they haven't saved anything for retirement and they now have little money.
I had just assumed that they were saving money. They never appeared to live beyond their means and didn't own an expensive house and didn't drive fancy new cars. In general her family is pretty frugal and I think the word 'cheapskate' would apply pretty well to some of them. In fact the word 'miserly' would even be appropriate to one or two of her relatives. (I don't mean that in a bad way.. just saying.) Take someone from a frugal family, give them a relatively high income in a low cost city for a couple decades and it just seemed a given to me that they'd pile up a big sum of cash. Apparently not so.
A year or two ago her husband quit his job and they moved their family halfway across the country back to our mutual home town. At that time I remember asking what they would do for work and apparently they didn't have work lined up. They had just quit and moved. I distinctly remember concluding then that they would be fine because I assumed they must have had a big pile of cash saved up. Actually the fact that he quit his job without another job lined up was another reason I assumed they had a big pile of cash. I gave them the benefit of the doubt that they wouldn't voluntarily jump into the unemployment pool during a recession without money in the bank. I suppose they may have had some money in the bank but apparently not enough to count towards any substantial retirement savings.
The best I can figure it, they just squandered their money and/or gave away a lot of it. They have little to show for it. The gossip I got also said they did have "thousands" of movies and a ton of toys for the kids. Oh... did I mention they have 6 kids and 4 still live at home? That kind of spending can add up of course, but I don't think they bought extravagant items. They were quite active in their church so I'm guessing they probably tithed 10% or even more. I also believe they were financially supporting his mother. They also eat organic foods apparently and for a family of 6 that could be pretty pricey.
I've tried to figure out how they could have spent all their money and where it could have gone. Honestly this is just blind guess work and I really have no idea where their money went. They spent the past 20-35 years or so living about 2000 miles away from me. After taxes they should have had $6000 to $7000 a month. Their home payment had to have been under $1500. That leaves them $4500 to $5500 a month to pay their bills and live on. I suppose they could have spent up to $2000 on food and eating out. Maybe they spent $1000 on bills. If they gave generously to their church and supporting his mother that could have accounted for $2000 more. This could easily account for all their money if they weren't careful to budget and save anything. Throw in 4-6 kids to raise and it is even that much easier to see how they could walk away with nothing. Top it off with a little credit card abuse and the resulting interest payments and it really shouldn't be hard for someone to spend away $100k a year. Its not very hard to squander a healthy paycheck and people do it all the time.
I even found that the company they used to work for does offer employer matching on the 401k plan. They may have never contributed to the 401k and lost out on employer matching or they may have cashed out the 401k when they quit and then spent away that money while they were unemployed after moving.
This kind of thing is way too common nowadays and unfortunately people end up like this all the time.
You should not assume someone is doing well financially and not only people with expensive new cars and McMansions are failing to save.