An Early Retirement May Bring Earlier Decline with Memory According to Study

Many people dream about retiring early and enjoying life. Well, life at the beach might come with a price that nobody wants to pay. Researchers from the Binghamton University, State University of New York found that early retirement can hasten cognitive impairment in older people.

A recent study raises some red flags about retiring early, pointing out that quitting your job and enjoying retirement may damage an individual's health. Early retirement may hasten cognitive aging in late life, according to the research published in the Journal of Economic Behavior & Organization.

To determine how retirement programs impact cognitive performance, the researchers used a cognitive survey called the Chinese Health and Retirement Longitudinal Survey (CHARLS) to assess this program.

Imagine the program similar to a 401(k) found in the United States, except that the Chinese government manages it. It is a pension benefit-defined contribution program. The program allows those who reach the age of 60 to retire and receive monetary benefits. The program is voluntary, so workers do not have to participate. 

Early Retirement Detrimental?

The research suggests that these retirement plans can be detrimental, as retirement plays a significant role in explaining cognitive decline at older ages.

The lead author of the research, Plamen Nikolov, assistant professor of economics at Binghamton University, State University of New York at the time of publication, says that participants in the program reported substantially lower levels of social engagement, with significantly lower rates of volunteering and social interaction than non-beneficiaries.

Many participants did retire early, although they were not required to do so. 

We find that increased social isolation is strongly linked with faster cognitive decline among the elderly.

Researchers observed a clear correlation between older adults' increased social isolation and a faster rate of cognitive impairment. According to the study's findings, early retirement has a detrimental impact on social engagement and mental fitness activities that outweighs its protective effects on healthy habits.

China’s Result Similar to U.S, U.K., and European Union

Nikolov says that nearly ten years since the program's implementation has led to a decline in cognitive performance by almost a fifth of a standard deviation on the memory measures they examine. 

Unexpectedly, the negative results in higher-income nations like the United States, England, and the European Union were similar to China's program consequences. This, Nikolov says, highlights the universal nature of retirement concerns.

We were surprised to find that pension benefits and retirement actually resulted in reduced cognitive performance. In a different study we found a very robust finding that the introduction of pension benefits and retirement led to positive health benefits via improvements in sleep and the reduction of alcohol consumption and smoking. The fact that retirement led to reduced cognitive performance in and of itself is a stark finding about an unsuspected, puzzling issue, but a finding with extremely important welfare implications for one's quality of life in old age.

In other words, while there are strong positive aspects to early retirement with someone's overall health, the reduced socialization resulted in a memory decline.

Risk of Increased Long-Term Health Care Cost

The study did not review the added cost of long-term health care resulting in the higher rate of memory loss and dementia. With long-term health care being a personal responsibility in the United States, outside of Medicaid, retirement planning should consider these costs and how they would drain income and assets.

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Medicaid will only pay for long-term care when an individual has little or no income and assets. Like any other traditional health insurance, Medicare will pay for a minimal amount of skilled care. Long-Term Care Insurance will pay for comprehensive services, including in-home care but cannot be purchased when someone's health has declined, when they already need care, or have several pre-existing health problems which don't meet underwriting guidelines.

Whether early retirement is in your future or you plan on retiring at an older age, being prepared for the consequences of longevity and long-term care should be considered in retirement planning. There are several options available with Long-Term Care Insurance that can provide guaranteed tax-free benefits to ensure quality care services and reduce burdens that are otherwise placed on family members.