Mistakes in their 60s leave a third in debt in their 70s

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happy senior couple

By the time we finally get the chance to leave the rat race, most people have been looking forward to it for years - if not decades. So it's no wonder that new research shows that we have big plans for our golden years. Some 22% of people plan to take a luxury holiday when they retire, 15% want a new car, 12% will take a cruise and one in ten will buy themselves a 'retirement' present.

However, the experts are warning that splurges like this are leaving people seriously strapped for cash in their later years.

Over-spending

The research, by LV=, shows an alarming level of over-spending just after we retire. Apparently in the first five years the average new retiree spends £33,000 on 'non-essential luxuries' like electronic goods, foreign holidays, going to the theatre and eating out.

During the average year, a new retiree will spend £1,280 on holidays, £1,814 on recreational things like going to the theatre and museums and £900 on dining out. In fact, in the first five years of retirement the average person will spend 20 nights of the year on holiday.

The £33,000 bill for all of this indulgence is is almost £900 more a year than the current state pension pays out, which means that the average savings pot of a retiree (£38,000), excluding any pension, will last just six years - despite the average retirement lasting 17 years.

Poverty later

As a result, as time wears on, these retirees are finding themselves in a financial hole. The research found that among pensioners six years or more into their retirement, 33% have taken out a credit card, one in 10 have taken out a loan and a similar number have not yet paid off their mortgage.

Almost a third of retirees entering their sixth year of retirement said they have had to significantly cut down on spending to avoid running out of their savings and more than a third worry that they will run out of savings. One in five strongly regret overspending during their first few years of retirement.

There are things retirees can do to make their money go further in retirement. It's essential to shop around before buying an annuity, which could increase your income by up to a third. You can also consider doing some part time work in the early years of retirement so you can afford some of the non-essential luxuries without eating into your savings.

However, even if they take these steps, it's clear that retirees also need to keep a firm grip on their spending in their 60s if they are to be able to enjoy life into their 70s and 80s too.