Congrats on the ASD!
Discussed multiple times, but to sum it up:
Apple's macOS UI is designed to offer the best user experience at normal viewing distance on ~110 ppi displays. That means 2560x1440 pixels for a 27" monitor (like the old cinema display and non-Retina 27" iMac).
"Retina" means such a high pixel density, that single pixels aren't perceivable anymore. This is what all newer Apple displays use.
In case of the ASD (or iMac 5K) the "looks like 2560x1440" is what Apple intended: The UI looks the same size as 2560x1440 but Apple doubled the pixel density (~220 ppi) so text and images look sharper / more detailed. The actual resolution is therefore 5120x2880.
Every other display setting than "looks like 2560x1440" deviates from displaying the UI in 2x scale and results in degraded image quality and additional GPU computational effort (therefore the warning underneath the scaling options). The only exception would be the native resolution of 5120x2880 which is way too small for every day use.
It depends on your usage if a larger/smaller UI benefits your work. You may not even notice the mentioned drawbacks.