Early retirement can accelerate cognitive decline due to a reduction in social interaction and activities requiring individuals to be mentally sharp.

The link was identified by researchers who analyzed the impact of a new pension program introduced in China in 2009. The New Rural Pension Scheme (NRPS) was launched as an attempt to lower old-age poverty. As part of the NRPS, those age 60 and older can start taking early retirement benefits. This includes an annuity that comprises a pension partly determined by the government and partly determined by previous contributions.

Administrative government data on the implementation of the program was collected from the Chinese government. Specifically, they look at data from the Chinese Health and Retirement Longitudinal Survey. The survey’s results were used to examine the behavior and socioeconomic characteristics of the program’s participants. The study took place between 2009 and 2013 in rural parts of China.

The most significant effect on those who took advantage of the NRPS by retiring early was a deterioration in their recall skills. Relative to performance before receiving the program’s benefits, cognitive performance declined by about 5%.

Lowered performance on delayed recall memory measures has been found to be a good detector of dementia among senior individuals. Prolonged exposure to the program further accelerated cognitive decline. Additionally, the study found more negative effects among women. A positive outcome of the program was an increase in the physical health of the participants.

The government subsidies were designed to boost permanent income and reduce incentives for full labor market participation. A decrease in labor market participation among retirement-age workers can reduce stress and improve sleep. Commenting on their findings, the researchers wrote, “Overall, in terms of cognitive performance, the adverse effects on the mediating input factors likely outweigh the positive effects.”

In a press release about the study, the researchers elaborated: “Social engagement and connectedness may simply be the single most powerful factors for cognitive performance in old age … We hope our findings will influence how retirees view their retirement activities from a more holistic perspective and pay particular attention to their social engagement, active volunteering, and participating in activities fostering their mental acuity.”

Source: “Do pension benefits accelerate cognitive decline in late adulthood? Evidence from rural China,” by Plamen Nikolov and Md Shahadath Hossain; Journal of Economic Behavior and Organization, November 2022.

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