We are thinking of giving a $650,000 ‘living inheritance’ to each of our two daughters. Is this wise?

I’m 56 and my wife is 53. I earn $125,000 a year, but she no longer works due to ill health. We have $550,000 in super, no debt, and we’ve just inherited $700,000 after the passing of our last parent. We have two children, aged 25 and 28.

I’m thinking of giving our current home, worth $650,000, to our daughter who still lives with us, and gifting the same amount to our other daughter so she and her partner can buy a first home. This would set them up well, but it’s a huge decision. My wife and I plan to keep working another four to six years, then travel around Australia in our caravan for 10 to 12 years before settling down. What are the risks versus the rewards of making such big gifts now?

It’s a generous plan, but a risky one. Once you hand over the house and most of the inheritance, your only real asset will be super – plus the caravan. That leaves you vulnerable, especially since you’ll need to support yourselves for six years after you stop work and before you qualify for the age pension.

If you keep working and contribute the maximum $30,000 a year (including your employer’s 12 per cent), your super could reach about $1.1 million by retirement. That’s a solid base, but you’ll still need a tight budget, even with cheaper living costs on the road.

A middle ground may be wiser: give each daughter $350,000 from the inheritance, but keep your home. That way you still change their lives yet preserve the security of a house to return to after the travelling years.

You should also consider protecting the gift by making it a loan repayable on demand in case of divorce. Then ask yourselves the hard questions: what are your annual spending needs in retirement? Will you still have enough after such a large gift? And how would you fund aged care if one of you needed it?

I’m 65 with $1 million in an indexed balanced super fund (75 per cent growth/25 per cent defensive) and my partner is 70 with $600 000 in the same mix. We draw the minimum 5 per cent annually, which is $80,000 in total. Would it make sense to leave all the growth investments – Australian and international shares – untouched, and keep $80,000 in cash to fund our annual withdrawals, rebalancing each year to restore the target mix? This way, the growth assets could compound with income reinvested, while the cash covers the minimum drawdown without selling shares in a weak market.

You are right – keeping a year’s worth of income in cash is a proven way to reduce sequencing risk, which is the danger of having to sell growth assets in a downturn to meet pension payments. It means your withdrawals are covered even if markets fall, giving your growth portfolio time to recover. And don’t forget to rebalance your portfolio at least once a year – this keeps your asset mix on track and allows you to top up cash reserves when markets are strong. Just review the size of the cash buffer regularly to ensure it’s keeping pace with inflation and your spending needs.

I can’t help wondering what the recent fall in interest rates really means. For retirees like me, who depend on interest income, it feels like a squeeze. I remember paying 17 per cent on our first home loan, yet today’s rates seem very low. Workers now enjoy wage rises, tax cuts and cheaper mortgages – but doesn’t that risk pushing inflation higher?

Meanwhile, retirees and investors face shrinking income and less spending power. Could that mix tip the economy towards recession? With more money chasing limited supply, aren’t prices bound to rise? So what’s really being achieved?

Every rate cut creates winners and losers. Borrowers benefit from lower repayments, which is why cuts are often used to fire up spending and support growth. But retirees and investors who rely on interest see their income shrink – and that dampens their spending.

Falling returns also trigger what economists call “relative attraction”. As bank deposits look less appealing, money shifts into property and shares, pushing their prices higher. Add wage rises and tax cuts to the mix, and the extra cash can fuel inflation, particularly when supply is tight.

The Reserve Bank’s challenge is to balance these forces: keeping the economy ticking without letting prices run away. For retirees, the lesson is clear – in these inflationary times you can’t afford to leave all your savings in low-yielding bank accounts. Broader investment options, matched to your risk tolerance, are essential.

I have a question about the tax deductibility of my son’s self-education expenses. Assuming he meets the eligibility criteria for a tax deduction, would the recently announced 20 per cent cancellation of HELP debts affect the amount of tuition fees and related expenses he can claim?

My own view is that it should not, as the debt cancellation could be treated like a repayment. However, one could argue that the portion of tuition fees and expenses cancelled by the government was not actually paid by my son but by the government, and therefore should not be deductible. I haven’t seen any commentary on this issue, and with tax time here, I’d appreciate your thoughts as soon as possible.

Tax specialist Julia Hartman says there is nothing in existing legislation, or in the new one, that reduces the amount deductible for a fee financed through a fee-help debt that later receives the 20 per cent discount. However, the reality is it may not even have been considered yet – I suggest you talk to your local federal member to try to find out if anything is in the pipeline – possibly even to raise their awareness of it.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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