http://www.diehards.org/forum/viewtopic.php?p=61762#61762

Here is a brief summary (my post on the thread)

The math is actually quite simple:

Variable Annuity vs 529 Plan
Pay taxes up front on both of them
You don’t pay taxes as both of them grow
You pay your full tax rate on both of them when you withdraw the money
You pay a little bit of extra expense over and above what tax-efficient mutual funds in a taxable account might cost you in both of them
You pay an EXTRA 10% penalty with the 529.

Thus, unless the 529 has a secret super-investment, it doesn’t make sense to use it unless there is at least some chance you’ll use it for education.

The higher current tax bracket makes tax deferral more attractive while higher future tax bracket makes LT capital gain from a taxable account more attractive. So it’s hard to judge if the 529 plan is used for regular retirement savings. A low-cost variable annuity may be preferable. Of course if the 529 plan is used to pay for educational expenses then yes the advantage is greater with a high current bracket.

Quick question:

If you were in a higher Tax bracket (35-38%) @ the age of 35 and suspect you will remain at a high bracket (but less than 35%) post retirement, then doesn’t it make even more sense to invest in a 529 as a means to invest long term?