Whereas executive functions are known to be closely tied to successful language processing in children and younger adults, less is known about how age-related decline in these functions affects language processing in elderly adults. Because the abilities to use linguistic context and resolve potential ambiguities such as between an idiom's figurative and literal meaning depend on executive functions, we investigated this issue by examining elderly adults' processing of idioms in context. We recorded event-related potentials of 25 younger (age 18-28) and 25 elderly adults (age 61-74) while they read literal sentences and sentences containing an idiom (e.g., the Dutch idiom "to walk against the lamp," meaning "to get caught"), each preceded by a neutral or predictive context sentence. Participants' use of context was hypothesized to relate to working memory capacity, while their ability to disambiguate idioms was hypothesized to depend on inhibition skills. Both groups showed facilitated processing for idioms compared with literal sentences and for sentences preceded by predictive compared with neutral contexts, indexed by a reduced N400. However, only elderly adults showed an increased P600 for literal but not idiomatic sentences preceded by a predictive context, suggesting that they rely on linguistic context when a sentence's meaning needs to be computed word by word, but not when a large part is retrieved from memory (as in idioms). Our findings suggest that in both younger and elderly adults processing literal sentences requires more cognitive effort than processing idiomatic sentences, and that cognitive aging affects language when processing is effortful.