Don’t stop saving for retirement. You probably don’t need a 529 at this late date, but you might want to consider opening a separate savings account for college money, and start “paying for college out of current income” now, rather than a year from now, by making regular monthly deposits into that account. At $300K in income, you should be able to afford college for two kids, but it will be easier to spread that cost over 7 years rather than 6 by putting 1/7th of your expected total cost into savings this year. I’d put it in a separate account that’s “hands-off” for any other expenses, just for clarity in accounting purposes. It could even be a 529 that you essentially use as a revolving fund, but that’s your call. This will also get you in the habit of actually setting aside the money you’ll need for college on a regular basis, with a slightly smaller adjustment to your lifestyle now than you’d otherwise need to make next year. And keep paying in at the same rate–1/7th of total expected cost–when your first child starts college next fall. That will leave you with a small surplus in the short term (next year’s costs should only be 1/8 of the total), but it will be less painful to spread the total cost over 7 years, rather than having 2 relatively affordable years of (college cost X 1), then 2 painful years of (college cost X 2), followed by 2 more years of (college cost X 1). Those 2 years in the middle will come as a real shock to the system unless you spread the cost evenly.
Got it? Next, consider whether you want to spread the cost over some additional years at the back end. You say you have a lot of equity in your home. A HELOC might be a sensible way to go. Interest rates are quite low, and with your income you should have no difficulty repaying whatever you borrow once the kids are out of school. With immediate savings on the front end (1 year), combined with a HELOC and 3-5 years of repayment on the back end, you could easily spread the cost of 8 years of college (compressed into 6 years of actual payments to the schools) into 10 to 12 years of payments out of current income, adding only the modest interest you’d pay on the HELOC. And you should be able to do this without doing any damage to your retirement savings, and fully recapturing your equity in our home by the end of the HELOC repayment.