Q. My wife and I are in our early thirties, with an infant, and another child on the way. We each have separate Roth IRAs (both began before we met) with about $10,000 and $6,000, respectively. Once we finish paying off my wife's graduate school loans— in about 9 months— we will be able to save at least $500 a month with more savings potential by 2017.

We also have separate term life insurance policies. We are wondering if converting to full life policies is a good idea for diversification, or should we put our full weight behind the Roth IRAs. I am a teacher with a good retirement plan and eight years experience.

We are beginning to plan how to save for our children's university educations. I've read that Roth’s can be withdrawn without penalty to pay for eligible university costs, and these vehicles offer us more flexibility. However, 529 plans can lock in tuition rates and offer tax reductions, but the future flexibility is limited. What is your opinion? —R.N., Dallas, TX

A. Your need for life insurance is probably higher today than it will be for the rest of your life, so staying with term life is a good thing. If your Roth IRAs have low-cost investment options, they are the most cost- efficient way to build net worth and avoid higher future tax rates. They are far more cost efficient, for instance, than carrying the cost burdens of cash value life insurance.

To create more flexibility, you can consider paying down your mortgage faster. The goal would be to have it paid off by the time your first child enters college. Between escaping the monthly payment and the possibility of a $100,000 home equity line of credit, you’ll likely have the flexibility to deal with college costs, at least at a public university.

Q. The conventional wisdom from financial advisers is that it’s not

possible to predict stock market ups and downs. Yet, I have read so

many commentaries in the last year predicting a large crash in 2016, that it is difficult not to be concerned. My wife and I are in our 70s. We don't really have a decade or more to wait for our portfolios to rebound. Can you provide some thoughts about these 2016 crash predictions that will ease our concerns? —L.H., San Marcos, Texas

A. We have had an abundance of predictions of great crashes since the end of World War II. So far, we’ve had two major crashes, three if you count the end of the Internet bubble. Crashes, or at least major market declines, are a fact of life. We need to plan our finances accordingly.

That means having little or no debt, so we can deal with an income decline more easily. It also means having liquid reserves that can be used, as needed, rather than selling investment assets at a major loss. The greatest losses I have seen over the last 50 years have been caused by excessive debt leverage and lack of liquid assets. This applies to over-leveraged companies as well as consumers with too much debt.

If you are capable of paying your bills by drawing no more than 4 or 5 percent from your assets, having a typical 60 percent stocks/40 percent bonds portfolio also means that you can spend down that portfolio from the bond side for at least eight years before you have to sell depressed stocks. This also suggests that your fixed income holdings should be in relatively short-term maturities, so they don’t decline much if interest rates rise.

Most market declines are over quickly, so having 10 years of “run room” puts you in good shape relative to the vast majority of the population. Most people, if they have any savings at all, could only last a few weeks if their income from work disappeared. Many people, particularly retirees, find that they can reduce their spending without great discomfort, simply by becoming more efficient spenders.

You can still survive big declines. According to www.portfoliovisualizer.com, if you had had three simple portfolios of $100,000 that ranged from 50, 60 and 70 percent total U.S. stock market and 50, 40 and 30 total U.S bond market and took $5,000 a year from each of them from 1995 to 2015, you’d still have $245,000 in the 50/50 portfolio and $300,000 in the 70/30 portfolio--- in spite of two major crashes.