Those who are newly retired will splash out on non-essential luxuries particularly in the first five years of retirement, according to new research.
Retirees aged 65 to 70 make the most of their new-found freedom and spend 33% more in these first years of retirement than they do in subsequent years, the research by LV= has revealed.
During the average year, a new retiree will spend £1,280 on holidays, £1,814 on recreational activities, including going to the theatre and museums, and £900 on dining out. In the first five years, this totals £32,719.56 on non-essential purchases, on average.
In the first five years of retirement, the average person will spend 20 nights of the year on holiday - more than any other age group, according to the Living Costs and Food Survey carried out by the Office for National Statistics.
As they retire, people believe they have earned the right to spend after years of work, with 32% of retirees prioritising 'having a good life and having as much fun as possible'. One in 10 retirees buy themselves a retirement present and one in five say they simply want to treat themselves.
When those over-50 and still working were asked about their plans for retirement, 22% said they will take a luxury holiday,15% will buy a new car, 12% will take a cruise, 8% will pay for property renovation and 5% plan to buy a property abroad.
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However, this spending could lead to having little money left over in the later years of retirement. Almost a third of retirees who were approaching their sixth year of retirement said they have to significantly reduce their spending to avoid running out of their savings and more than a third worry about running out of savings. One in five strongly regrets overspending during their first few years of retirement.
Richard Rowney, LV= life and pensions managing director, said: "Retirement has changed. While previously retirees started to wind down once they left work, today's retirees quite rightly want to make the most of the free time they suddenly have. It's great to see that people are enjoying themselves in retirement, however these numbers highlight the need for retirees to ensure they have financial flexibility in retirement.
"The average retirement is now 17 years, much longer than past generations, meaning your lifestyle and associated costs are likely to change over this period. For this reason, it is important that they consider structuring their income in a way that allows them to adapt to their changing needs."