Thousands of civil servants have been removed from a 'no man's land' whereby they would be forced to retire at 65 but unable to claim a pension until a year later.
New rules, which were signed into law yesterday, mean they can continue in their jobs until the age of 70 if they wish.
Around 5,000 older people were already caught out over social welfare entitlements, with many left with no option but to sign on the dole and formally pretend they were available for work.
Thousands more would have joined them in the coming years.
The legislation passed in recent weeks will apply to most public servants recruited before April 2004, other than the designated uniform grades such as gardai, prison officers, firefighters and members of the Permanent Defence Force.
Amid concerns last year, the Government agreed to rehire some of the civil servants for a year until they qualified for the State pension.
This cohort won't be affected by the change in law.
Finance Minister Paschal Donohoe said retirement at 70 would now be compulsory.
Workers now have the option to work beyond 65 to the age of 70, on existing terms and conditions, if they so choose, subject to the normal standards of health and performance, he said.
"The new compulsory retirement age of 70 reflects the fact that people are living longer, healthier lives and that many wish to remain at work for longer because they feel they have more to contribute to work and to society," Mr Donohoe added.
Junior Minister Patrick O'Donovan said: "This is a great step forward for the public service and will ensure that we do not prematurely lose the wealth of experience built up in the public service."
Public servants who decide to work beyond 65 can continue to accrue retirement benefits, subject to a maximum of 40 years' service.