Study in China finds that retirement may accelerate cognitive decline, even for those with stable income

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Peo­ple who retire ear­ly suf­fer from accel­er­at­ed cog­ni­tive decline and may even encounter ear­ly onset of demen­tia, accord­ing to a new eco­nom­ic study (Note: opens PDF) I con­duct­ed with my doc­tor­al stu­dent Alan Adelman.

To estab­lish that find­ing, we exam­ined the effects of a rur­al pen­sion pro­gram Chi­na intro­duced in 2009 that pro­vid­ed peo­ple who par­tic­i­pat­ed with a sta­ble income if they stopped work­ing after the offi­cial retire­ment age of 60. We found that peo­ple who par­tic­i­pat­ed in the pro­gram and retired with­in one or two years expe­ri­enced a cog­ni­tive decline equiv­a­lent to a drop in gen­er­al intel­li­gence of 1.7% rel­a­tive to the gen­er­al pop­u­la­tion. This drop is equiv­a­lent to about three IQ points and could make it hard­er for some­one to adhere to a med­ica­tion sched­ule or con­duct finan­cial plan­ning. The largest neg­a­tive effect was in what is called “delayed recall,” which mea­sures a person’s abil­i­ty to remem­ber some­thing men­tioned sev­er­al min­utes ago. Neu­ro­log­i­cal research links prob­lems in this area to an ear­ly onset of dementia.

Cog­ni­tive decline refers to when a per­son has trou­ble remem­ber­ing, learn­ing new things, con­cen­trat­ing or mak­ing deci­sions that affect their every­day life. Although some cog­ni­tive decline appears to be an inevitable byprod­uct of aging, faster decline can have pro­found adverse con­se­quences on one’s life.

Bet­ter under­stand­ing of the caus­es of this has pow­er­ful finan­cial con­se­quences. Cog­ni­tive skills – the men­tal process­es of gath­er­ing and pro­cess­ing infor­ma­tion to solve prob­lems, adapt to sit­u­a­tions and learn from expe­ri­ences – are cru­cial for deci­sion-mak­ing. They influ­ence an individual’s abil­i­ty to process infor­ma­tion and are con­nect­ed to high­er earn­ings and a bet­ter qual­i­ty of life.

Retir­ing ear­ly and work­ing less or not at all can gen­er­ate large ben­e­fits, such as reduced stress, bet­ter diets and more sleep. But as we found, it also has unin­tend­ed adverse effects, like few­er social activ­i­ties and less time spent chal­leng­ing the mind, that far out­weighed the positives.

While retire­ment schemes like the 401(k) and sim­i­lar pro­grams in oth­er coun­tries are typ­i­cal­ly intro­duced to ensure the wel­fare of aging adults, our research sug­gests they need to be designed care­ful­ly to avoid unin­tend­ed and sig­nif­i­cant adverse con­se­quences. When peo­ple con­sid­er retire­ment, they should weigh the ben­e­fits with the sig­nif­i­cant down­sides of a sud­den lack of men­tal activ­i­ty. A good way to ame­lio­rate these effects is to stay engaged in social activ­i­ties and con­tin­ue to use your brains in the same way you did when you were working.

In short, we show that if you rest, you rust.

Because we are using data and a pro­gram in Chi­na, the mech­a­nisms of how retire­ment induces cog­ni­tive decline could be con­text-spe­cif­ic and may not nec­es­sar­i­ly apply to peo­ple in oth­er coun­tries. For exam­ple, cul­tur­al dif­fer­ences or oth­er poli­cies that can pro­vide sup­port to indi­vid­u­als in old age can buffer some of the neg­a­tive effects that we see in rur­al Chi­na due to the increase in social iso­la­tion and reduced men­tal activities.

There­fore, we can not defin­i­tive­ly say that the find­ings will extrap­o­late to oth­er coun­tries. We are look­ing for data from oth­er coun­tries’ retire­ment pro­grams, such as India’s, to see if the effects are sim­i­lar or how they are different.

– Pla­men Nikolov is Assis­tant Pro­fes­sor in the Depart­ment of Eco­nom­ics at The State Uni­ver­si­ty of New York (at Bing­ham­ton). A big focus of the eco­nom­ics research lab he runs is to bet­ter under­stand the caus­es and con­se­quences of changes in what econ­o­mists call “human cap­i­tal” – espe­cial­ly cog­ni­tive skills – in the con­text of devel­op­ing coun­tries. One of the main ways they do this is through the use of ran­dom­ized con­trolled tri­als to mea­sure the impact of a par­tic­u­lar inter­ven­tion, such as retir­ing ear­ly or access to micro­cre­d­it, on edu­ca­tion out­comes, pro­duc­tiv­i­ty and health deci­sions. This arti­cle was orig­i­nal­ly pub­lished on The Con­ver­sa­tion.

The Study:

Pen­sion Ben­e­fits, Ear­ly Retire­ment and Human Cap­i­tal Depre­ci­a­tion in Late Adult­hood (Papers, arXiv.org)

  • Abstract: His­tor­i­cal­ly, econ­o­mists have main­ly focused on human cap­i­tal accu­mu­la­tion and con­sid­er­ably less so on the caus­es and con­se­quences of human cap­i­tal depre­ci­a­tion in late adult­hood. Study­ing human cap­i­tal depre­ci­a­tion over the life cycle has pow­er­ful eco­nom­ic con­se­quences for deci­sion-mak­ing in old age. Using data from the intro­duc­tion of a retire­ment pro­gram in Chi­na, we exam­ine how the intro­duc­tion of a retire­ment pro­gram influ­ences individual
    cog­ni­tion. We find large neg­a­tive effects of pen­sion ben­e­fits on cog­ni­tive func­tion­ing among the elder­ly. We detect the most sub­stan­tial impact of the pro­gram to be on delayed recall, which is a sig­nif­i­cant pre­dic­tor of the onset of demen­tia. We show sug­ges­tive evi­dence that the pro­gram leads to larg­er neg­a­tive impacts among women. We show that retire­ment plays a sig­nif­i­cant role in explain­ing cog­ni­tive decline at old­er ages.

The Study in Context: