This study uses Lawton's model of "the good life " to examine whether the Apolipoprotein E-ε4 genotype functions as a risk factor not only for specific diseases but also for a misfit between elders' personal needs and their physical and social environments. A biracial cohort of community-dwelling elders from five North Carolina Piedmont counties was assessed annually for 10 years. Six-year survivors (N = 2,076) were genotyped for this retrospective-prospective cohort study. Compared to those in whom this allele was absent, participants with the ε4 allele were not different in social or residential resources, social behavioral competence, or perceived quality of resources. Exposed elders had an excess 10-year adjusted risk of institutionalization of 1.72 (95% Cl = 1.29, 2.29), totally mediated by cognitive problems. The threat of the APOE ε4 genotype to person-environment fit is mediated by cognitive problems, a finding that has focused but important implications for residential decision making in late life.