You're missing that there are other investment options.
My college expenses were largely paid for with US Savings Bonds which paid between 4-9%. I cashed in the last one, which ceased paying 9% interest in 2011. My ING Direct 5%, 10-year CD matured last year.
The problem is is with this weird never-land world where we're printing money with no inflation, it's difficult to make money anywhere. My son's 529 plan is in a basket of volatile stock and bond funds. I'll probably make a similar return to my dad's savings bond portfolio, but at substantially higher risk.
> My son's 529 plan is in a basket of volatile stock and bond funds.
Depending on the age of your son, you may really want to consider investing in more stable assets. 20 years is a typically considered a minimum time-horizon for being heavily-weighted in stocks due to their volatility. If your son is older than 5, preservation of the earnings you've already made should start to become a significantly higher priority than high returns.
That's true iff the 529 plan money is "required" for college. If you take instead the view that the 529 plan is just one type of asset that your child has, that you are optimizing for lifetime returns, and that attending vs not attending college is not changed by the 529 returns, then you could take the view that the 529 funds are just as subject to optimal asset allocation as any IRA or brokerage investments the child might have.
Though my kids are 5 and 7, I plan to invest on their behalf in 529, UTMA, and other accounts with their anticipated lifespan as the controlling factor, not which moment I expect to need the funds (because it is overwhelmingly likely that there will be other funds available if needed).
My college expenses were largely paid for with US Savings Bonds which paid between 4-9%. I cashed in the last one, which ceased paying 9% interest in 2011. My ING Direct 5%, 10-year CD matured last year.
The problem is is with this weird never-land world where we're printing money with no inflation, it's difficult to make money anywhere. My son's 529 plan is in a basket of volatile stock and bond funds. I'll probably make a similar return to my dad's savings bond portfolio, but at substantially higher risk.