Retirees worry inflation will ravage their savings, but the reality is often less scary

Retirees do a lot of hand-wringing over spending their savings.

In fact, fewer than 1 in 3 retirees are comfortable withdrawing money, and 7 in 10 say it's very important that their nest egg doesn't shrink in retirement, according to a recent report from Corebridge Financial. More than a third of retirees say they've held back from spending to protect their savings stash.

That's the question posed in a new paper analyzing how spending plays out in retirement.

"Most existing financial planning tools and retirement research assume that retiree spending grows relatively lockstep with inflation," David Blanchett, head of retirement research for Prudential Financial and the paper's author, told Yahoo Finance.

"But … in fact, for most retirees, spending declines over time," he said.

That matters because understanding that spending doesn't increase to keep up with inflation dramatically reduces either how much you need saved or increases how much you can spend, Blanchett said.

"While inflation is important, it's not that important," he said. "Hopefully, this allows people who are in retirement or about to retire to be more willing to do the things that they enjoy."

Some reduced spending is likely due to people cutting back because they don't have adequate savings, but this analysis suggests that even retirees who could materially increase spending tend not to.

"Many retirees are likely more on track for retirement than implied by models, which require constant real spending," he said.

But there's a big asterisk in all of this spending optimism: healthcare, which has become one of the biggest costs for retirees, and it's extraordinarily difficult to budget for.

"It's very true that even as total expenditures decrease at older ages, healthcare costs rise for retirees," Blanchett said.

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For example, someone under age 35 devotes less than 5% of their spending to healthcare, while a 75-year-old spends roughly 15%.

A 65-year-old who retired last year can expect to spend an average of $172,500 in healthcare and medical expenses throughout retirement, according to Fidelity.

That estimate does not include long-term care expenses, which can easily multiply. Healthcare expenses, particularly toward the end of life, can be staggering when you consider the soaring costs of assisted-living units, memory care facilities, and round-the-clock healthcare aides.

But many retirees won't face those catastrophic costs, Blanchett said. "Some people will. If you live a long time, however, the probability and the magnitude of some kind of long-term care expense increases dramatically," he said.

Retirement is "incredibly complex and incredibly personal, which makes it difficult to generalize any specific assumptions to all retirees," he added