Unfortunately, you've picked a bad time to get into ARs. Parts and especially 16" uppers are very expensive right now.
That said This is how my duty carbine (doubles as home defense) is set up.
I started with a Colt 6920 LE Carbine which is essentially a civilian legal M4 Carbine. For optics I have an Aimpoint Comp M reflex type sight in an A.R.M.S. #22M68 mount with spacer. The Aimpoint is very rugged (the Army bought it and is equipping most M4s and M16A2s in Infantry units with it). I have the 7 MOA dot (I got a deal on it if I took the larger dot) and wish I'd have got the 3 MOA model. The 7 MOA is just a little big for shooting at smaller targets out past 100 yards. I have this mounted as far forward as I can on the flattop. Cost of this sight and mount will run about $400.00. Unless you are going to use the Aimpoint in conjunction with a passive night vison device, you can save yourself some money by buying a Comp ML which is exactly like the Comp M except it doesn't have the settings that are only visible through the image intensifier of passive night vision. With either model, make certain you buy the XD version, which is the newest version and has brighter dot intensity and better battery life. If you want to stay with your carry handle upper, Aimpoint makes a forward mount that fits in the carry handle and puts the Aimpoint just behind the front sight. This is a very fast and accurate setup. It also allows you to use your iron sights normally if your Aimpoint's battery should go dead or otherwise fail. A.R.M.S. also makes a forward mount that also allows you to mount an optic or light above the carry handle, but I think that this is overkill.
I have installed the Knights Armament RIS (Rail Interface System) in place of the standard handguards. This system puts a Picatinney rail on all four sides of the barrel, this makes it very handy to mount lights, lasers, a forward handle etc. Cost is about $280-$300 If you don't anticipate mounting any of these accessories, I wouldn't spend the money. I have a light mounted on mine, the only laser I think has any tactical application is an IR one for use with night vision goggles. There are plenty of other good options to mount a light that are less expensive. Knights is now selling the RAS which attaches to the barrel more securely which will make mounting a reflex type optic right behind the front sight an option. This is why I bought my RIS, but it didn't hold zero well so I moved it back onto the upper. I understand that these problems have been corrected with the RAS.
Since I use a flattop upper, I have installed a backup rear sight. I have the Knights 300 meter flip up sight. It works fine. It is only adjustable for windage. All of the elevation adjustments must be made with the front sight, just like with the old A1 type iron sights. My only complaint is that the plastic aperature insert fell out during a Jim Crews carbine school, leaving me with just a large ghost ring instead of the smaller peep sight. This aperature is designed to be removeable, but my experience is that it's a little too removeable
. Cost on this sight should be between $80-$100. DPMS, G.G.G., A.R.M.S. and others all make other types of backup rear sights.
I have a 6v SureFire light mounted on the RIS. I have a flip up red lens on the SureFire. Really saves the night vision. Cost of this unit was around $240.
That is how I have mine setup. Now let's get into converting yours.
For general defensive use I prefer a light barrel. The police department bought Colt Model 6721 Tactical Carbines. This model has a 16" heavy barrel. Then I bought my 6920 which has an M4 contour barrel, which is like the M16A2 barrel, heavy at the front and light weight under the handguards. Most of the others preferred the lighter weight of the M4 contour barrel over the full heavy barrel. I think it points better. M4 barrels are bringing a premium right now though. JT Distributing has some Colt 1/9 twist chrome lined M4 barrels right now for $299. The light weight barrels are a little cheaper, but the heavy weight ones are the cheapest (they are less in demand, as the big thing in ARs is light weight right now). Another option is an actual 14.5" length M4 barrel. You can find these a bit cheaper, but you have to have an extended flash hider such as a vortex or one of the extended aftermarket A2 types permanently attached to bring the barrel length to 16 inches so it's legal without any class 3 paperwork.
You can stay with your old upper unless you feel you want to mount optics. If you are going to go with a reflex type sight, the forward mount is great. Flattop uppers go from about $100 for SGW to up to $300 for a genuine Colt M4.
I have the 4 pos telestock on my 6920, but unless you are going to be getting in and out of vehicle or aircraft or have unique storage requirements you would probably be better served with one of the fixed stocks. They are much more stable. Many people find the A2 stock too long for them and prefer the A1. I'm 6'2", 235 and am more comfortable shooting with the A1 stock or the telestock, but everyone arm length and shooting style is a bit different. One advantage to the telestock is that the length of pull is adjustable for smaller statured family members i.e. wife and children
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I do a lot of shooting and really like the setup I have now, but for basic needs I think you can get by with the 16" barrel and a good light.
HTH
Jeff