Retiree Spending Fears Overstated — Inflation Not The Bogeyman
By John Nada·Jul 9, 2026·3 min read
Retirees may overestimate inflation impacts. Research shows declining spending over time, but healthcare costs remain a major concern.
Retirees do a lot of hand-wringing over spending their savings, and it's a concern that has been echoed repeatedly. In fact, fewer than 1 in 3 retirees express comfort with withdrawing from their savings, according to a recent report from Corebridge Financial. The study shows that a significant 7 out of 10 retirees consider it crucial that their nest egg remains intact throughout their retirement years. This preservation mindset leads more than a third of retirees to hold back on spending to protect their savings. But what if these fears are outsized?
David Blanchett, head of retirement research for Prudential Financial, challenges the conventional wisdom surrounding retiree spending in his recent paper. "Most existing financial planning tools and retirement research assume that retiree spending grows relatively lockstep with inflation," Blanchett explains. However, his findings reveal that, contrary to popular belief, spending for most retirees actually declines over time. This revelation is significant because it suggests that the need for a substantial savings buffer might be less pressing than previously thought.
Blanchett's research suggests that understanding the nuances of retiree spending can either reduce how much individuals need to save or increase how much they can comfortably spend. "While inflation is important, it's not that important," he emphasizes. The implication is clear: retirees might find more freedom to enjoy their golden years if they grasp that their spending does not need to escalate parallel to inflation.
Despite this optimistic view of retiree spending, healthcare costs present a complex challenge. Blanchett and other experts note that while overall spending may decline with age, healthcare demands grow significantly. For instance, Fidelity estimates that a 65-year-old retiree will face an average of $172,500 in healthcare expenses throughout retirement, excluding long-term care. This daunting figure underscores the growing burden healthcare costs place on retirees.
Healthcare expenses, particularly in later life, can be staggering due to the rising costs of assisted living, memory care facilities, and round-the-clock healthcare aides. To put this into perspective, individuals under age 35 allocate less than 5% of their spending to healthcare, while those aged 75 and above spend approximately 15% of their budget on medical needs. This sharp increase highlights healthcare as a significant factor that can disrupt financial stability in retirement.
Blanchett suggests that many retirees are more financially secure than models, which require constant real spending, might imply. Despite having the capacity to increase expenditures, retirees often choose not to, indicating that psychological factors and a fear of the unknown play substantial roles in their spending habits. This conservative approach may stem from deeply ingrained anxieties about financial insecurity and unexpected expenses.
Understanding these dynamics is crucial for retirees and financial planners alike. Blanchett's research points to a potential disconnect between perceived and actual financial security among retirees. By acknowledging that their spending typically decreases over time, retirees may alleviate some of their financial concerns and find empowerment in their financial decisions. However, the unpredictable rise in healthcare expenses remains a critical concern that requires careful planning and consideration.
In light of these findings, it may be time for a broader conversation about financial confidence in retirement. While the fear of inflation may be overstated, the looming specter of healthcare costs cannot be ignored. Retirees, financial advisors, and policymakers need to address these dual realities to ensure that individuals can enjoy their retirement years with peace of mind.