Disadvantages
While the number and types of 529 plans is growing, not all investment vehicles are available in 529 form.
Unlike other types of tax-deferred plans, such as 401(k) plans, IRS rules allow only a single exchange or reallocation of assets per year in a 529 plan.
The earnings portion of money withdrawn from a 529 plan that is not spent on eligible college expenses will be subject to income tax, an additional 10% federal tax penalty, and the possibility of a recapture of any state tax deductions or credits taken. For example, if you contribute $50,000 into a 529 plan and it grows to $60,000 over time and you make an unqualified withdrawal for the entire amount, you are taxed on the $10,000 gain plus a 10% penalty on the $10,000 which would be $1000 penalty.
Read more about this topic: 529 Plan