Importance:Difficulty performing daily activities such as bathing and dressing ("functional impairment") affects nearly 15% of middle-aged adults. Older adults who develop such difficulties, often because of frailty and other age-related conditions, are at increased risk of acute care use, nursing home admission, and death. However, it is unknown if functional impairments that develop among middle-aged people, which may have different antecedents, have similar prognostic significance. Objective:To determine whether middle-aged individuals who develop functional impairment are at increased risk for hospitalization, nursing home admission, and death. Design, Setting, and Participants:This matched cohort study analyzed longitudinal data from the Health and Retirement Study, a nationally representative prospective cohort study of US adults. The study population included 5540 adults aged 50 to 56 years who did not have functional impairment at study entry in 1992, 1998, or 2004. Participants were followed biennially through 2014. Individuals who developed functional impairment between 50 and 64 years were matched by age, sex, and survey wave with individuals without impairment as of that age and survey wave. Statistical analysis was conducted from March 15, 2017, to December 11, 2018. Exposures:Impairment in activities of daily living (ADLs), defined as self-reported difficulty performing 1 or more ADLs, and impairment in instrumental ADLs (IADLs), defined similarly. Main Outcomes and Measures:The 3 primary outcomes were time from the first episode of functional impairment (or matched survey wave, in controls) to hospitalization, nursing home admission, and death. Follow-up assessments occurred every 2 years until 2014. Competing risks survival analysis was used to assess the association of functional impairment with hospitalization and nursing home admission and Cox proportional hazards regression analysis was used to assess the association with death. Results:Of the 5540 study participants (2739 women and 2801 men; median age, 53.7 years [interquartile range, 52.3-55.2 years]), 1097 (19.8%) developed ADL impairment between 50 and 64 years, and 857 (15.5%) developed IADL impairment. Individuals with ADL impairment had an increased risk of each adverse outcome compared with those without impairment, including hospitalization (subhazard ratio, 1.97; 95% CI, 1.77-2.19), nursing home admission (subhazard ratio, 2.62; 95% CI, 1.99-3.45), and death (hazard ratio, 2.06; 95% CI, 1.74-2.45). After multivariable adjustment, the risks of hospitalization (subhazard ratio, 1.54; 95% CI, 1.36-1.75) and nursing home admission (subhazard ratio, 1.73; 95% CI, 1.24-2.43) remained significantly higher among individuals with ADL impairment, but the risk of death was not statistically significant (hazard ratio, 1.06; 95% CI, 0.85-1.32). Individuals with IADL impairment had an increased risk of all 3 outcomes in adjusted and unadjusted analyses. Conclusions and Relevance:Similar to older adults, middle-aged adults who develop functional impairment appear to be at increased risk for adverse outcomes. Even among relatively young people, functional impairment has important clinical implications.