To retire or not to retire, a decision once dictated by company policy, is now solely up to employees. But the 1986 law abolishing mandatory retirement has had surprisingly little impact on the 40-year trend toward early retirement.

Though workers now are legally entitled to continue on the job as long as they are willing and able, in practice most people retire before 65. The average retirement age is 62.Less than 3 percent of Americans 70 and older, the age group directly affected by the 1986 law, held full-time jobs last year, according to the federal Bureau of Labor Statistics.

Philip Rones, a Labor Department specialist on elderly workers, says the end of mandatory retirement didn't lead to significant increases in elderly workers, despite warnings by business and industry groups that the law would disrupt company personnel practices.

"First, most people don't work beyond 70, and those who do typically would not face mandatory retirement anyway because they are self-employed," Rones says.

The 1986 "Pepper Act," named after Rep. Claude Pepper, D-Fla., who championed elderly causes until his death last year at the age of 88, amended the Age Discrimination in Employment Act to abolish mandatory retirement at firms with 20 or more employees.

The act initially barred discrimination, including forced retirement, against workers aged 40 to 65. The ceiling was raised to 70 in 1978 and then abolished entirely in 1986.

Despite the law's negligible effect on retirement practices, its passage may have had a symbolic importance not brought out by government statistics.

"It was critical for those who want to remain in the work force," says Martin Sicker of the American Association of Retired Persons. "The numbers affected may be small, but nonetheless we're talking about people who have rights. It was very necessary for those directly affected."

For G. Austin Hay, a 72-year-old film producer for the U.S. Department of Transportation, abolishing mandatory retirement was more than a symbolic gesture.

"I like what I'm doing, so why give up a perfectly good job and income?" he says. "Working is a discipline. It's rewarding and you feel you're accomplishing something. When you retire you just don't have that.

"There's another factor, health. The last physical I had the doctor said I was in super-excellent health for my age. If I were failing I would retire. Working contributes to good health."

Few people Hay's age apparently share such enthusiasm for work, however.

The percentage of men over 65 who are working has fallen steadily in the postwar era, dropping from 46 percent in 1950 to 17 percent last year.

Although the rate edged up eight-tenths of 1 percent between 1985 and 1989, Rones at-tributes the increase to structural changes in the labor force, not the end of mandatory retirement.

Only 8 percent of women over 65 were in the labor force last year, but Rones says their participation had always been low. "This is the last generation of women who did not fully participate in the work force," he says.

Driving the trend for early retirement are improvements in Social Security benefits and the growth of private pensions, according to labor market analysts. In addition, many companies, pressured to cut labor costs, offer incentives for early retirement to older workers who are usually at the top of the pay scale.

"People are opting to retire because they want to," says Ronald C. Pilanzo, president of the Society for Human Resource Development, which represents company personnel officers.

"People are saying, `Look, 30 years in the company is too long. If somebody gives me a chance to leave early, I'll do something different with my life.' "

Mike Adams of Waterloo, Iowa, was a press operator at the Deere and Co. farm implement plant for 36 years when he retired in 1983 at the age of 61. He gets a $700 monthly pension and $1,000 in Social Security.

"With the pension I had and healthwise, it was the best thing I could have done," Adams says. "We were losing too many jobs and I retired to help younger people get work."

Adams says had it been 20 years earlier he could not have afforded early retirement. "A guy retiring then was getting $180 a month from John Deere plus Social Security. That wasn't enough to live on," he says.