One pensioner in four overspends in their first year of retirement, forcing them to borrow money to make up for this spending spree.
Of those who overspend, almost half (48 per cent) turn to credit cards to make up the difference, with more than one in five (21 per cent) resorting to selling possessions and 17 per cent taking out personal loans.
That is according to new research from Prudential that examined experiences of people adjusting to life on a pension.
"For the average person, when they hit retirement, their income drops overnight. So it's not surprising that many find it difficult to adjust their lifestyle, especially in the first year," said Trevor Mitchell, Prudential UK head of retirement income.
"The 'pensioner splurge' is a very real phenomenon. If a pensioner spends too much in the first year and does not have enough aside for the rest of their retirement, they could be left short later on."
Close to half of those polled (45 per cent) found it hard to adjust in the first year, with 14 per cent saying it was "very hard".
Of the 26 per cent who overspent as a result, one in two spent between £1,000 and £5,000 more in their first year than they did in subsequent years. But overspend was much worse for some, with 15 per cent splashing out over than £10,000 more than they do later on in their retirement.
Just one person in 12 turned to equity-release to fund this overspend, with most selling assets and borrowing money to cover their costs.
But Prudential points out that savvy retirees can use the switch to a pension as an opportunity to increase their income later on in life.
When you move from paying into a pension fund to buying an annuity that pays you a regular income for life, you do not need to use the full amount built up in the fund to secure an income.
For example, people hitting retirement can choose to take £10,000 from their pension fund up front and use the rest of the money to buy an annuity.
And close to two-thirds of the pensioners surveyed took this option, 61 per cent of these withdrawing more than £10,000 up front, and another 40 per cent taking out over £20,000 in the first year.
But the type of annuity bought with the rest of the money can also make a difference.
"With-profits annuities are particularly attractive as they can provide a regular income today, with the opportunity of increasing income in the future. By contrast a fixed annuity will not rise, so a person may find that the value of their annuity is nibbled away by inflation," said Prudential's Mr Mitchell.
"With-profits annuities may rise because they are based on the performance of the with-profits fund. They are suitable for a wide range of people with 'low to medium' attitudes to risk."
"However, people should note that future bonus rates are not guaranteed and income from a with-profits annuity can go down as well as up."