We investigated how lexical form similarity of referential candidates and ambiguity of following pronouns impact the encoding and retrieval of words from memory during sentence processing in younger and older adults. Critical sentences included two noun phrases (henceforth NPs) that were either phonologically and orthographically similar (Jason and Jacob/Jade) or dissimilar (Jason and Matt/Hannah), followed by a pronoun (e.g., he) that was either ambiguous or unambiguous (depending on the genders of the preceding NPs). We analyzed brain activity time-locked to the onsets of the second NP (NP2) and the pronoun to investigate the encoding and the retrieval of the NPs, respectively. During encoding NP2, older adults exhibited greater alpha power when NP1 had the same-gender, whereas younger adults showed no such effect, suggesting an increased need for inhibition for older adults during encoding. Moreover, although both groups exhibited an increase in alpha power for similar NPs, only younger adults exhibited a theta power increase, suggesting similarity-induced inhibition for both groups, but an additional maintenance cost only for younger adults. During retrieval (i.e., on the pronoun), we found that both pronominal ambiguity and form similarity resulted in greater theta power for younger adults, suggesting full pronominal processing and therefore more difficult retrieval, but smaller theta/alpha power for older adults, suggesting good-enough processing and therefore easier retrieval. Together with complementary behavioral results, our findings suggest that older adults resort to good-enough referential processing when the retrieval of relevant representations is cognitively demanding. (PsycInfo Database Record (c) 2024 APA, all rights reserved).