Cognitive skills, such as processing speed, memory functioning, and the ability to divide attention, are known to diminish with aging. The present study shows that, despite these changes, older adults can successfully compensate for degradations in speech perception. Critically, the older participants of this study were not pre-selected for high performance on cognitive tasks, but only screened for normal hearing. We measured the compensation for speech degradation using phonemic restoration, where intelligibility of degraded speech is enhanced using top-down repair mechanisms. Linguistic knowledge, Gestalt principles of perception, and expectations based on situational and linguistic context are used to effectively fill in the inaudible masked speech portions. A positive compensation effect was previously observed only with young normal hearing people, but not with older hearing-impaired populations, leaving the question whether the lack of compensation was due to aging or due to age-related hearing problems. Older participants in the present study showed poorer intelligibility of degraded speech than the younger group, as expected from previous reports of aging effects. However, in conditions that induce top-down restoration, a robust compensation was observed. Speech perception by the older group was enhanced, and the enhancement effect was similar to that observed with the younger group. This effect was even stronger with slowed-down speech, which gives more time for cognitive processing. Based on previous research, the likely explanations for these observations are that older adults can overcome age-related cognitive deterioration by relying on linguistic skills and vocabulary that they have accumulated over their lifetime. Alternatively, or simultaneously, they may use different cerebral activation patterns or exert more mental effort. This positive finding on top-down restoration skills by the older individuals suggests that new cognitive training methods can teach older adults to effectively use compensatory mechanisms to cope with the complex listening environments of everyday life.