Background <p>Although links between social factors, psychological characteristics and functioning have been established, interactions between social vulnerability and psychological characteristics impacting later-life functioning remain unclear. We investigated whether social vulnerability is associated with physical and emotional functioning and with the change in functioning over 5 years. Further, we studied whether optimism and self-efficacy moderate these associations.</p> Methods <p>Physical and emotional functioning were measured in 2015 and 2020 using the SF-36 Health Survey in participants from the Helsinki Birth Cohort Study data (<i>n</i> = 1153, mean age 74y). Social vulnerability comprised several self-reported and register-based social indicators. We used linear mixed models to analyse the associations between social vulnerability and physical and emotional functioning, the change in functioning, and the moderating effects of optimism and self-efficacy.</p> Results <p>Social vulnerability was inversely associated with the level of physical (β =-2.71, <i>p</i> &lt; 0.001) and emotional functioning (β =-2.55, <i>p</i> &lt; 0.001), as well as with the changes in physical functioning over the 5-year follow-up (β =-1.09, <i>p</i> = 0.003), but not with the decline in emotional functioning. Optimism and self-efficacy served as moderators by buffering the negative association of social vulnerability on emotional functioning, but not physical functioning. Optimism or self-efficacy did not moderate the change in physical or emotional functioning.</p> Conclusion <p>By impacting social vulnerability we may be able to promote functioning in older age. Social and psychological characteristics need to be acknowledged when planning effective health interventions and services for older adults.</p>