Research has suggested that memory performance may be related to the extent of stimulus processing during acquisition. To examine processing efficiency and processing deficiency differences between younger and older adults, four studies were conducted. In the first study, young and old adults rated word lists, manipulated for generation specific familiarity, and completed a free-recall test. Results showed that young adults recalled more words than older adults. However, on the word list, older adults did better than younger adults. In the second study, subjects rated word lists and completed a forced-recall test to investigate the role of individual differences in incidental learning. The results produced were identical to the first study. In addition, an effect of cardiovascular health status on unfamiliar materials was found. In the third study, subjects rated a single word list and completed individual difference measures of anxiety, intelligence, education, and mental activity. The results showed the existence of a difference between younger and older healthy adults, and that cardiovascular health status did effect performance for both unfamiliar and familiar words. Level of education and mental activity were positively correlated with performance. In the fourth study, subjects, varied by mental activity while holding educational level constant, rated word lists. The results showed that level of education was the important individual difference rather than mental activity. These findings suggest that age-related memory differences reflect a combination of inefficiency of processing and actual loss of processing capacity, both of which are modulated by individual difference variables. (BL)