<p>Your question is really confusing. It’s unclear why you are looking at a five year scenario and it’s unclear if you expect to be eligible for financial aid.</p>
<p>I encourage you to read the book How to Pay for College without Going Broke.</p>
<p>If you are preparing to send a child to college in five years or so, the general advice is to:</p>
<ol>
<li>Put as much as you can afford into your retirement accounts.</li>
<li>Put as much as you can reasonable afford into your home. Most schools allow a certain amount of home equity to be “safe” from financial aid calculations. Plus, interest expense on mortgages is tax deductible, so you may as well take advantage of this. Even if your home equity eventually exceeds the financial aid limitation, parking money in home equity is a good idea and you can borrow against it in the future.</li>
<li>The only reasons to put money in 529 accounts are because (1) your state may allow a tax break (usually only up to the first $2000 in deposits each year); and (2) because the interest/capital gains is tax free so long as the proceeds are used for eligible educational expenses. So, it can be a good place to shelter assets if you don’t expect to qualify for financial aid. Otherwise, a 529 account is treated as any other parental asset in financial aid calculations. So having a ton of money in a 529 account isn’t necessarily a good idea if you expect to quality for financial aid. It may be a good idea if you don’t expect to qualify, but usually not at the expense of retirement accounts and home equity.</li>
</ol>