This study explores how older adults maintain psychological well-being despite inevitable physical decline, a phenomenon often described as the “well-being paradox”. Using data from the SONIC (Septuagenarians, Octogenarians, Nonagenarians Investigation with Centenarians) study, cluster analysis identified a distinct group of older adults who exhibit low physical function yet high psychological well-being. In addition, we examined the longitudinal relationship between changes in physical function and psychological well-being, and tested the moderating role of self-transcendence. The results show that self-transcendence significantly buffers the negative impact of physical decline on mental health, life satisfaction, and negative affect. However, it does not protect against the decline in positive affect. These findings suggest that aging well is not merely the preservation of function but involves a transformation in how individuals relate to their physical limitations.  Details and registration here