DEAR DAVE: Should I take advantage of a 403(b) withdrawal in order to buy a house?
DEAR BRYAN: I wouldn't do that because it really doesn't accomplish anything. The only money you can take out is what you've put in, and any growth you've experienced has to stay in there. Basically, it's a retirement plan, and I wouldn't monkey around with retirement money to buy a home.
My advice is to make sure you're debt-free and you have three to six months of expenses set aside in an emergency fund. Once you've taken care of those issues, you can pile up a bunch of cash in a money-market account toward the purchase of a home. You won't earn a lot of money, but it's a safe place to park your cash when you're saving up for a big purchase.
When it comes to saving and investing, I'm a big fan of mutual funds. The problem in this scenario is that if you start sticking money in mutual funds, then the market is down when you're ready to buy, you could've lost some money. That's not the route I'd want to go if I'm in your shoes, Bryan. I'd forego the opportunity to make money in order to keep it safe for this goal.
DEAR DAVE: I'm 24 years old, and I have a wife and child. We've been following your plan and I'm about to buy life insurance. Should I get a 20- or 30-year term policy?
DEAR DEREK: I think the big question is how long will you need this life insurance. If you and your wife are planning on having more kids in the next 10 years, I'd suggest a 30-year policy. That could put you in a situation of being 34 years old with a new baby. That's not old by any means, but your wife will need 20 years' worth of coverage if this happens, because you'd want the kids grown and out of the house before the insurance term runs out.