The Institute of Directors said more people wanted to work past 65 because they were living longer, healthier lives.
In response to a consultation on the so-called "default" retirement age, the IoD also cautioned that while many people would be capable of working into their 70s, it would not be possible for all.
The organisation said: "In some instances it simply won't be possible for employers to adapt jobs to suit older workers, and in small firms it may be completely impossible to redeploy older workers to suitable jobs. For these reasons, many employers will continue to need the flexibility provided by the default retirement age.
"This does not mean that there is no scope for reform. We propose that the default retirement age is raised, initially to 68. Such a step would allow people to work longer, while ensuring employers retain the flexibility they need to manage their workforces."
Director general Miles Templeman said: "No sensible employer wants to lose good staff just because they've reached a certain age. Equally, it is important that capable employees, who want to work longer, have the opportunity to do so. We think that the current system, where employees can work beyond the default retirement age with the agreement of their employers, is sound."