Similar to annuities, 529 plans' tax advantages for wealthy families has become one of their key features, much to the chagrin of the Washington politicians who initially backed their development, said Joseph Hurley, president of SavingforCollege.com.

"They don't want this to become just a conventional investment that has this tax sheltered wrapper available for wealthy families putting in large sums of money. This is all structured around the premise that these states were going to have targeted investment programs and that this was not going to just become a conventional 401(k) type tax sheltered investment. But now it's starting to look more and more like the 401(k)," Hurley said.

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