I actually was thinking about this recently. My character has had to retreat several times when close to dying. I didn't know really where to retreat. I wanted to go into town but felt that was wrong for some reason.
On that note, I am quite surprised that the town doesn't have guards hanging around. After all, with all the goblins, orcs, bandits, etc. nearby, I would think that a few guards would be necesary to keep the peace.