As they grow older, many Americans begin to think about the best time to retire.

Yet a new study throws some warning signs around that decision — as retiring early could actually worsen people's health. 

A recent paper published in the Journal of Economic Behavior & Organization suggests that early retirement may accelerate cognitive decline in late adulthood.

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"Participants in the program report substantially lower levels of social engagement, with significantly lower rates of volunteering and social interaction than non-beneficiaries," said lead author Plamen Nikolov, assistant professor of economics at Binghamton University, State University of New York, in a press release about the study.

"We find that increased social isolation is strongly linked with faster cognitive decline among the elderly," he also said.

Here's how the study analyzed cognitive functioning.

With a rapidly aging population, China introduced a formal pension program in rural parts of the country in 2009 to combat poverty in old age. 

It's called the New Rural Pension Scheme (NRPS), Nikolov noted. 

"The program is a pension benefit-defined contribution program, so think of that as a 401k in the U.S. — except that the government administers it in China," he told Fox News Digital.

The program is a voluntary opt-in, "so you don't have to participate."

"The basic feature is that if you reach age 60, the benefits kick in — like an annuity that entitles you to monetary benefits," he noted. 

"So you don't have to retire early to draw the benefits, but many [do] retire earlier than they would have without the program," he also said.

The researchers analyzed this program using a cognitive survey called the Chinese Health and Retirement Longitudinal Survey (CHARLS) to see how retirement plans affect cognitive performance. 

Participants in the pension program reported a reduced incidence of regular alcohol drinking compared to the previous year, the researchers found — but they also found that the participants reported lower rates of volunteering and social interaction compared to the non-beneficiaries.

They also noted that the increase in social isolation was strongly associated with faster cognitive decline among the elderly.

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The study concluded that early retirement’s negative influence on mental fitness activities as well as social engagement outweighed the protective benefit on health behaviors. 

The researchers found that the most significant indicator of cognitive decline was delayed recall, which previous research has shown to be an important predictor of dementia.

Nikolov and his team argue that their study and research design are geared to detect true causal effects of retirement on cognitive impairment.

"One of the toughest problems in economic and social science research is determining whether a relationship between two variables is causal or coincidental," Nikolov said. 

However, understanding the cause and effect of an economic or policy decision is often impossible, as randomized controlled trials of policies are often not practical or ethically possible, the study's press release pointed out.

For example, in a randomized controlled trial — the gold standard in research to show the effectiveness of a treatment or intervention — participants are randomized to a treatment group or a control group without knowing their group, according to the National Institutes of Health. 

To tease out cause and effect when a randomized trial is not possible, economists use a method called "natural experiments." 

This uses random events or real-life situations that create events or policies that can mimic controlled experiments, Nikolov told Fox News Digital.

The application of natural experiments to tease out cause and effect relationships was so influential that a team of economists who originally introduced the method received the 2021 Nobel Prize in economics, he said.

Using this statistical tool, Nikolov noted the researchers were able to study how the decision to retire could impact cognition by comparing two groups.

They compared one group of people of similar age and socioeconomic characteristics who were in the pension program — and another group of people of similar characteristics in areas where no pension program existed. 

The individuals in the areas that had the pension program scored considerably lower than individuals who live in areas that do not offer the program. 

These results were surprising, the study found, because they were similar to the findings of the same phenomenon in higher income countries or areas, such as America, England and the European Union.

"When you go to work, you use your brain actively — and in some ways, going to work helps your mental abilities, like going to the gym improves physical fitness," Nikolov told Fox News Digital. 

The study also highlights the benefits of interacting with other people as we age. 

"When we interact with people, it has at least two components that are beneficial for you," he added.

The first part is social interaction, where "social connectedness can generate a positive feedback loop of social, emotional and physical well-being."

He also said, "The second benefit of a bigger social network is that more interaction with friends and family naturally enhances mental and intellectual stimulation."

He noted as well in the press release about the study, "The kinds of things that matter and determine better health might simply be very different from the kinds of things that matter for better cognition among the elderly. Social engagement and connectedness may simply be the single most powerful factors for cognitive performance in old age."

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He also said in the release, "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," Nikolov said. 

He said the researchers also "hope to influence policymakers. We show robust evidence that retirement has important benefits. But it also has considerable costs."

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More studies are needed to generalize the findings outside of China, Nikolov told Fox News Digital, and to confirm whether early retirement leads to a similarly large impact on cognitive health in other settings.

He added, "Although the survey was designed to be representative of China, it is very challenging to generalize from this study on how the rollout of similar programs translate to cognitive health for other populations [that exhibit] very different socioeconomic characteristics."