Why is 35-39 AG for men so tough compared to 20-24 and 25-29 and 30-34

That is my AG.  

I think that many guys don't have the disposable cash and time to train until they are about 35 years old.  I did 5K's and Half Marathons until I was in the M 35-39 AG.  Putting down a few thousand dollars for Tri gear and then taking travel time (more money) for race is cost and time prohibitive for many younger athletes.  

I was winning first in my AG at about every 5K I went to from age 25-35.  Now that I am doing Triathlon I am no longer the top dog but I am working to get there.  Guys that were winning when they were 20-34 best watch out because in I am going to start peaking and when I do and start passing them at 25 MPH on the bike and then turn in the top AG run they aren't going to know what hit them.  

Yep, it's all of the reasons you have listed.  

Money is definitely a big factor. I'd say it's the biggest factor, with experience learning all 3 sports being the 2nd. But all the other stuff you listed is def legit - kids, relationships, etc. When you're married, settled down with kids over 8, and with good income, serious triathlon training is a lot more realistic. 

I think Thomas hit on a big part of it......the guys who are in their early 20's who are fast you rarely see in local (AG) races....that's more true now then it was 15-20 years ago.  They are running or swimming in college or doing triathlon on another level.  Give them 10 years, worn out and closing in on being too old to be competing at a higher level....and here they come.  Remember, in AG triathlon especially, but the same holds in running and swimming too at the AG level....."fast" is relative.

At the pointy end, the decline in age-related performance is pretty low.  

Look past M35-39, and there's barely a difference in M40-44 and M45-49.  

Often the decline in physical ability (endurance sports) is more than offset by experience and better race strategy.  

Yeah, that's the point I was trying to make.....you said it better than I did.

Yeah, if you get in a sprint race with any kid in the top 15-20 of the Jr. Elite circuit you're going to likely get your arse handed to you as an AG'er.  By the time those kids are in their late teens to early 20's they have 20-30 races under their belts and many of them have been in international competitions. If you can't swim a :50 - :55 100 in the pool,  ride in a pack at 25+ mph, and then run a 16-17:00 5K off the bike you can't touch them. And if you can't hit the swim time, forget the rest of it, you'll barely even sniff the top 20 even if you can bike and run with them.. The podium finishers at their events are usually faster then those numbers.  I know I'm preaching to the choir with you bo, but it's funny how many people don't know how fast those young sprint racers are. When they drop down to AG racing for fun it's ugly for the beer league racers.

thats interesting, around me the top 10 guys routinely have 5+ guys aged 20-29

I haven't really followed the AG national race since the races from 2013-2015.....but back then, for the sprint race, 5 or so of the top 10 were usually teenagers....all of them had raced in the Jr. elite series.  They destroy local races.....many times winning sprint events by 4-7 minutes.

WELL YEAH, if you go to ironman races, which are incredibly expensive and require much more money to train/compete in, there tend to me more older people doing well.  But the vast majority of triathlon is not ironman races.