The present study used an equivalent noise method to characterize the sources of reduced performance in fine discrimination of motion with age. We varied the density of the displays, the speed and speed variability and the temporal correlation of dots' motion in successive frames to assess their effect on the sensitivity to motion direction. The results showed that, in all experimental conditions, the older observers had higher levels of internal noise. Both age groups used the stimulus information less efficiently at slow speed and most efficiently when the moving elements were uncorrelated across frames. The older observers were less efficient than the younger observers in all conditions except at high speed where the efficiency of the two age groups was the same. We fitted two biologically plausible models to the experimental data: a modified version of the local-to-global direction encoding model (Dakin et al. in Vis Res 45:3027-3049, 2005) and a model for pooling of motion information in medial temporal area (MT) where the neuronal responses were correlated (Huang and Lisberger in J Neurophysiol 101:3012-3030, 2009). The modeling results indicate that the correlation in neuronal responses is essential to characterize the influence of speed and speed variability on the sensitivity to direction information. For the younger observers, a single set of parameters can account for the effect of noise and the spatio-temporal parameters of the stimuli, while, for the older observers, a change in the correlation of neuronal activity and the directional tuning bandwidth with the levels of external noise is needed. The findings are discussed with respect to optimal use of the dynamic information to overcome the negative effect of aging.