The FAFSA considers a 529 account owned by you the same as it considers any other asset you have, like a taxable brokerage account (retirement accounts and primary residence are excluded). Parents' assets don't raise the expected family contribution by a whole lot, something like five cents on the dollar. If you will be retired you won't have your salary anymore, which will make a much bigger difference than whether or not you still have a 529 account open.
Whether or not you liquidate the account and transfer it to your older daughter should really be a question of whether you want to give that much money to your older daughter at this time. If you do, transferring it from the 529 would have the same effect on your younger daughter's financial aid as transferring it from a taxable brokerage account. Meanwhile, leaving that money to grow tax-free in the 529 until your younger daughter is in college could be a smart move, assuming you expect to contribute that much to her future education.
