One in three people retiring this year will have debts averaging nearly £17,500 that will take more than three years to clear.
Most of the money is owed on mortgages, credit cards and bank loans.
Nearly half of over 55s owe the money on credit cards (48%), while a third have outstanding bank loans (31%) and 14% will have a mortgage.
The average debt is £17,460, but 8% owe more than £20,000 and 4% have no idea how much they are in debt.
The research by equity release lender Key calculates that most retirees expect to carry their debt for 3.5 years, while 12.5% expect to take almost a decade to clear their loans, with a third of them never expecting to pay back what they owe.
The research also revealed those retiring in debt do so because they have last-minute unplanned expenses and one in three do not make any financial plans for retirement until within 12 months of the date they intend to give up work.
Will Hale, CEO at Key, said: “With changes to the state pension due to start coming into effect this year, it is vitally important to understand the challenges and aspirations of the ‘retirement class of 2020’.
“Our findings suggest that while most people work hard to retire debt-free, this is not the reality for one in three people who need to consider how they can service and repay over £17,000 in borrowing from their retirement nest egg.
“Even those with generous incomes may find this a stretch and people are taking an average of three-and-a-half years to clear the debts they retired with – at a time when they should be enjoying an active retirement and worrying less.”
Half of Welsh retirees in debt
The survey also shows where retirees live can impact if they retire in debt.
While 48% of over 55s in Wales retire in debt – the highest number in the UK – the figure falls to 20% in the North West – the lowest total in the country.
The largest average debt for retirees is £22,900 in the North East, while the lowest amount is just £9,000 in Yorkshire and The Humber.
“There is a lot of help available online on how to budget for retirement and working with a financial adviser in the run-up to retirement can make a massive difference in being as retirement ready as possible,” added Hale.