Familiarity enhances working memory by reducing interference, not by freeing capacity

Working memory (WM) allows us to temporarily store and manipulate information, but it has severe capacity limits. One proposed mechanism for overcoming these limits is the substitution of familiar information with long-term memory (LTM) representations, thereby freeing WM capacity for novel items. Across six experiments, we tested this hypothesis by manipulating the familiarity of visual stimuli and examining their effects on memory for concurrently presented novel items. Surprisingly, familiar items did not improve memory for novel items via freeing capacity at encoding or maintenance. Instead, the benefit arose at retrieval: familiar items, stored in LTM and discarded from WM after encoding, produced less interference during recall. This mechanism differs from set-size effect and is additive to retro-cue benefit, indicating that familiar items are not merely deprioritized in WM but functionally discarded. These findings reveal that LTM enhances WM not by freeing storage capacity but by reducing retrieval competition, redefines how WM and LTM interact and highlights retrieval interference—not storage limits—as a potential bottleneck in memory performance under load.