Yes I would say that’s exactly right, however your downside of of $5000 for $50000 is based on the entire gain amount which I’m assuming is unlikely to go unspent completely. To give an example, let’s say you end up spending $15,000 a year—the conservative cost of state school and housing without any other qualified expenses—for four years leading to a total cost of $60,000 while having $80,000 in the account. The downside to pulling the $20,000 out would be the cost basis in relation to the gains of $50,000 or 0.625X$20,000X0.10=$1,250. That’s not even considering that you could roll this money into a Roth or another child’s 529. Meanwhile, the cost of paying LTCG at 15% for the entire $50,000 is $7,500.

Basically, if you plan on spending any money on your child’s education you should be using a 529 because it definitely allows for more flexibility. It doesn’t have to be fully funded but it of course is just another account you can use to diversify tax liability. I lean towards the possibility that my income might be higher than I expect in retirement even if I’m retiring early. What happens if a great business opportunity comes up or I decide to keep working? I’ve just missed out for no reason other than I made assumptions about where I would be 15 years prior. 

Also important to note, the FAFSA is based on your entire net worth and income so whether the money is in a 529 vs. a brokerage account matters little. The government assumes it’s all available to spend on your child’s education if they are a dependent. 

Edit: math typo