President Reagan endorsed legislation yesterday that would prohibit mandatory retirement in government and private industry because of age as he proclaimed May as "Older Americans' Month."

Reagan, 71, the oldest ever to serve as president, said in a brief Rose Garden speech that "older Americans possess a reservoir of experience and a depth of knowledge that is a great national resource...When it comes to retirement, the criterion should be fitness for work, not year of birth."

Apparently referring to questions raised about his own age during the 1980 election campaign, Reagan said: "Some of us have already reached a certain chronological age which others thought should keep them from their jobs."

Under legislation passed in 1978, the age at which employers have the option of forcing workers to retire was raised from 65 to 70. Under Reagan's proposal, an employer would never be able to retire a worker because of age.

A Labor Department study last year indicated that removal of the mandatory retirement age would add 200,000 persons to the work force but would have minimal impact on the employment of youth, minorities and women. After the retirement age was raised from 65 to 70, the study found, the number of older workers increased by 250,000.

Reagan used yesterday's occasion to attempt again to counter charges that his economic program is unfair to the needy. He said that the decline of inflation had helped elderly living on fixed incomes, and that while the old make up only 11 percent of the population they will receive 28 percent of the federal budget this year.

Meanwhile yesterday, former vice president Walter F. Mondale, speaking here to the National Council on the Aging, called Reagan's policies an "enormous economic disaster" for America's elderly. He urged Reagan to rewrite his proposed 1983 budget to cut military spending instead of programs such as food stamps, Medicare and energy aid.

Mondale, noting the announcement that unemployment rose last month to 9 percent, matching the previous post-World War II peak of May, 1975, said Reagan's policies had "paralyzed economic recovery."

White House deputy press secretary Larry Speakes said the administration was "disappointed" by the increase in unemployment.