Background: Psychotic symptoms are an important and increasingly recognized aspect of Alzheimer’s disease (AD). They have been shown to contribute to faster disease progression in clinic-based, demographically homogenous samples with high educational attainment. Objective: We studied the association between baseline psychotic symptoms and disease progression among individuals with incident AD or ‘at risk’ of developing AD, from a demographically heterogenous, community-based cohort with minimal educational attainment. Methods: 212 participants received the Columbia University Scale of Psychopathology in Alzheimer’s Disease scale. Participants had psychotic symptoms with any of: visual illusions, delusions, hallucinations, or agitation/aggression. Disease progression was measured yearly and defined by meeting cognitive (≤10 on the Folstein MMSE) or functional endpoints (≥10 on the Blessed Dementia Rating Scale or ≥4 on the Dependence Scale). Results: The mean age was 85 years old. The cohort was 78.3% female, 75.9% Hispanic, and had a mean 6.96 years of education. Within the follow-up period (mean: 3.69 years), 24 met the cognitive endpoint, 59 met the functional endpoint, and 132 met the cutoff for dependence. The presence of at least one psychotic symptom was initially associated with an increased risk of reaching the functional endpoint (HR 3.12, 95% CI 1.67–5.86, p < 0.001) and the endpoint of dependence (HR = 1.498, 95% CI 1.05–2.13, p = 0.03). However, these associations were attenuated and non-significant when adjusted for baseline functional status. Psychotic symptoms were not associated with the cognitive endpoint. Conclusion: Psychotic symptoms may predict functional decline in patients of non-Caucasian ethnicity and with lower educational attainment.