Before 2011, the annual growth of a 529 plan was a fixed simple interest of 3%, which only took into account the principal. However, with the now compounded annual growth rate (CAGR), the results can be as much as the growth of your investment plan. This is because CAGR accounts for the principal and accrued interest to calculate the earnings for the following year. For example, if your investment was on S&P, which had a 12% CAGR from 2011 to 2020, with a $10,000 529 account balance, your account could have accumulated $17,731 tax-free earnings, compared to $3,048 on the same period if it was using the 3% simple interest formula.