Objective: Intergenerational coresidence is usually assumed to be beneficial to the subjective well-being of the Chinese elderly, but this proposition is not well supported in empirical studies. This study addresses this puzzle by incorporating older adults’ living arrangement preference and their contact with noncoresidential children into the investigation.

Methods: We used data from four waves of the CLHLS in 2005–2014 and applied fixed-effects models to examine the effect of intergenerational coresidence on Chinese elderly’s subjective well-being and how this effect was moderated by their living arrangement preference and contact with noncoresidential children.

Results: Intergenerational coresidence declined steadily in 2005–2014, but the concordance between individual’s actual and preferred living arrangement remained very high, and most older adults living independently maintained frequent contact with their children. Intergenerational coresidence had no effect on older adults’ subjective well-being. However, the match between an individual’s actual and preferred living arrangements and the frequent contact between parents and their noncoresidential children were important to the subjective well-being of Chinese elderly.

Conclusions: Because the actual living arrangement of most of the Chinese elderly accorded with their preferred living arrangement and most older adults living independently maintained frequent contact with their children, problems resulting from the decline of intergenerational coresidence were limited.

Contribution: This study provides a convincing explanation for the unexpected but repeatedly verified insignificant effect of intergenerational coresidence on Chinese elderly’s subjective well-being by incorporating two understudied factors into the analysis: older adults’ living arrangement preference and their contact with noncoresidential children.