Older adults have consistently been found to perform more poorly on memory tasks than young adults. This age-related difference in memory has been attributed to decreased ability to understand language. However, very little is known about language comprehension in older adults. The goal of the proposed research is to explore age-related changes in cognitive operations that are essential for understanding and remembering language. We examine the utilization of semantic and pragmatic knowledge during on-line comprehension of language, the role of working memory in comprehension processes, and the relation between initial comprehension and subsequent retention in young and older adults. Thus, we are concerned with mental processes that are critical components of the everyday activities of understanding spoken conversation or written text and remembering what has been understood. Twelve experiments are proposed which explore processes involved in understanding written and spoken discourse as well as in subsequent retention of discourse. The experiments are designed to answer four broad questions. (1) Do young and older adults differ in their ability to use prior linguistic context to specify meanings of words during comprehension of language? (2) Are there age-related differences in ability to draw logical and invited inferences from sentences? (3) Are young and older adults differentially affected by heavy demands on working memory during language comprehension? (4) Can age-related differences in comprehension account for age-related differences in retention?