Previous research applying quantifiable measurements has established significant positive associations between social capital and mental health in older adults. This study aimed to obtain a deeper understanding of the causal mechanisms of social capital affecting mental wellbeing among older people. The study is based on two independent qualitative data materials collected through two focus group interviews and an open-ended question included in a Finnish population-based postal survey. The findings indicate that informal social contacts such as family members and life-long relationships between friends impact the experienced mental wellbeing among older adults due to shared life events, social support, mutual appreciation and trust, as well as a sense of belonging through common social activities. Hence, this study challenges Putnam's idea of social capital as a collective concept focusing on formal contacts and the benefits on a collective level. In addition, the findings highlight the obstacles specific to older adults in maintaining social networks and participation, which should be considered in order to promote mental health in later life.