The average savings pot among people aged 55 and over has fallen 27% over the past year as more households dip into funds to meet day-to-day living costs, a report by Aviva says.
The company said it had been an "annus horribilis" for those in the age bracket, with the average level of savings and investments now at £11,153 compared with last year's average of £15,262.
While the figure has been skewed by the fact that more people started to save during the year, Aviva said it believed it also reflected a trend for households to raid savings accounts due to a reduction in their income.
The report found that average income for the over-55s rose in the latest quarter to £1,285 but is still 4% down on a year earlier. With inflation running at 5.4%, this means that the typical person in the age bracket is worse off.
Aviva retirement director Clive Bolton said: "While the average amount the over-55s have in savings is down, this is partly due to the fact that more people are now starting to save, which is good news.
"However, with income levels falling and inflation rising, it is going to make it difficult for some to maintain their standard of living and to secure a comfortable retirement income for themselves."
More people in the age group have started saving in the past year and the number of non-savers has hit its lowest level for two years with 41% recorded in 2010 compared to 36% this month, suggesting that people have started to think about the rainy day.
However, the report found that more than a third (37%) of economically active over-55s have yet to make plans for their finances in retirement, with the majority only starting to think about it at age 48, and then waiting until they are 52 before seriously worrying about it.
Some good news for the over-55s is that their houses are, on average, 46% more valuable (£238,284) than the average UK home (£163,311).
With the typical pension pot standing at £29,940, this means the over-55s have more than eight times as much equity in their homes as they do in formal retirement savings, and Aviva believes that there will be a more widespread take-up of equity release in the future.