hn:
Like every other investment, the 529 Plan is a great strategy for some investors, and a poor plan for others. There is no such thing as a one-size-fits-all investment. In order to determine if the 529 is your best college savings option, you would have to evaluate the strengths and weaknesses of those plans against your own unique financial circumstances.
Like 401ks, 529 plans lost billions and billions in the meltdown of the markets, and many investors who were idly secure that their kids' private college expenses were all taken care of are now contemplating State U, instead. As with any other investment, returns are tied to risk - the more you hope to profit from your plan, the more risk you have to assume.
If your child or children are young, conservative 529 plans provide a safe and secure investment vehicle that are likely to provide slow, steady and reliable growth of your funds. If your children are fairly close to college age already, you would need to invest in a high flying, risky plan in order to have any hope of growing your money quickly.
I'm not a financial advisor, so I have nothing to gain by recommending that you speak with one - but that's what I'm going to do. Your best bet may be a prepaid tuition plan - with college costs growing faster than inflation, there's a lot to be said for locking in today's prices for a student who will be going to school well after tomorrow. Many of those plans will return your funds to you if your child chooses not to attend college, or opts for a college in another state.
A well-managed 529 is a great investment option - especially for the tax benefits - and especially if your state allows you to write off your contributions. There's risk involved, relative to the growth that you are expecting from the plan, and the management fees on some plans make them far less attractive than others. Another concern with a 529 is the tax hit that you'll take on a rainy day, if you ever need to raid the plan for something other than educational expenses.
Do the research - you can certainly find your own plan - and you can find plenty of resources that will allow you to compare plans. Look for a plan with low management fees, and look for a plan that is suited to your risk tolerance. Take the time to review other options, like the Coverdell plans or the prepaid tuition, too.
But - without knowing your situation - I can't tell you if the 529 plan is the way for YOU to go.
Here are a couple of good articles from Smart Money Magazine and from Money Magazine to get you started on your reading:
http://moneyfeatures.blogs.money.cnn.com/2009/04/24/college-savings/
http://money.cnn.com/2008/08/08/pf/college/529_plans.moneymag/index.htm
http://www.smartmoney.com/personal-finance/college-planning/a-setback-for-college-savings/
Good luck - I hope this helps.