During the performance of cognitive tasks such as memory encoding, attention can become decoupled from the external environment and instead focused on internal thoughts related to the appraisal of the current task (task-related interferences; TRI), or personal thoughts unrelated to the task at hand (mind-wandering; MW). However, the association between the frequency of these thoughts experienced at encoding and retrieval accuracy in young and older adults remains poorly understood. In this study young and older adults encoded lists of words using one of two encoding tasks: judging whether words are man-made/natural (objective task), or whether they are pleasant/neutral (subjective task). We measured the frequency of TRI and MW at encoding, and related them to retrieval accuracy in both age groups. We found that encoding task influenced the type of internal thoughts experienced by young, but not older, adults: young exhibited greater MW in the subjective vs the objective task, and greater TRI in the objective vs subjective encoding task. Second, across both tasks we found marked age-related decreases in both MW and TRI at encoding, and frequency of these thoughts negatively impacted memory retrieval in young adults only. We discuss these findings in relation to current theories of ageing, attention and memory.