Everyday activities break down into parts and subparts, and appreciating this hierarchical structure is an important component of understanding. In two experiments we found age differences in the ability to perceive hierarchical structure in continuous activity. In both experiments, younger and older adults segmented movies of everyday activities into large and small meaningful events. Older adults' segmentation deviated more from group norms than did younger adults' segmentation, and older adults' segmentation was less hierarchically organized than that of younger adults. Older adults performed less well than younger adults on event memory tasks. In some cases, measures of event segmentation discriminated between those older adults with better and worse memory. These results suggest that the hierarchical encoding of ongoing activity declines with age, and that such encoding may be important for memory.