Psychological well-being of caregivers of demented elderly people was investigated during two years of follow-up. Three groups of caregivers were distinguished: those providing care for two years after baseline; those whose care-recipient died within the first year after baseline, and those whose care-recipient was institutionalized within the first year. Compared to general population norms, all groups of caregivers showed a great amount of psychological distress, especially those whose elder suffering from dementia deceased within the first year after baseline. The course of psychological well-being of caregivers who continued to provide care during follow-up supported the wear-and-tear model: an overall deterioration of psychological well-being was found (measured by the GHQ-12, SCL-90-R and SWLS) as elders' functioning declined and caregiving at home continued. Specific increases were found on total amount of psychological distress, but also on the SCL-90-R subscales: Depression, Anxiety, Interpersonal Sensitivity and Paranoid Ideation and Difficulty with Cognitive Performance. No overall changes were found for caregivers whose demented care-recipient had died or was institutionalized in the first year after baseline. These data suggest that the high level of psychological distress and the deterioration in psychological well-being among informal caregivers of dementia patients is a reason to reconsider the merits of the current trend to have demented older people live on their own as long as possible. Additional support should be considered.