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# Lump Sum Payouts: Questions You Should Ask Yourself Before You Invest a Dime

Receiving a lump sum payout can be very exciting because formany individuals it’s rare to have the opportunity to spend or invest a largeamount of money at one time.  But figuring out what to do with a lump sumpayout also can be very stressful, especially if you aren’t comfortable makingfinancial decisions.
Once you fully understand all of your options, you’ll be in abetter position to make a good financial decision.  So try to resist the urgeto make a quick decision regarding how you’ll use your lump sum payout.  Manyexperts recommend that you should take several months or even a year to decidehow you’ll use the money, especially if the payout is tied to an emotional event,such as a death of a family member or a separation from your job.
While we can’t tell you what to do with your lump sumpayment, we can help you make an informed decision.  Before you decide,consider these questions: 
Am I carefully avoiding fraud?
Your lump sum payout may make you a target for scams, particularly if reports of coming payments have been in the news.  You should be particularly wary if someone approaches you, instead of the other way around, to discuss what to do with the money. 

Often, you can avoid fraud byasking questions and doing research on any financial professionals orinvestment opportunities you are considering.  You should also beware of the warning signs for fraud, including promises of quick profits or guaranteed returns, and pressure to send money immediately. Walk away from those so-called "opportunities." 
What is my current financial situation?
Maybe you’ve never had a financial plan or lived on abudget.  Now’s the time – even before you buy that boat you’ve been eyeing.  Ifyou sit down and take an honest look at your entire financial situation, youwill be in a better position to use your lump sum payout wisely.  

A lump sum payout may give you the opportunity to buy ahome, live a comfortable retirement, save for a child’s education or reach anotherinvestment goal.  Make your own list of investment goals – including that boat– and then think about which goals are most important to you.  

Many tools exist to help you put a financial plan together. For example, the BallparkEstimate, a single-page worksheet created by the American Savings EducationCouncil, can help you calculate what you’ll need to save each year forretirement. The NASD has a college savings calculator, and the Social Security Administration has a benefitscalculator to estimate your potential benefit amounts.

For more information about making a financial plan, read Get the Facts on Saving andInvesting and Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing.  
Do I need the help of a financial professional?
If you’re the type of person who will read as much aspossible about your options and ask the right questions about them, you may not need expertadvice.

But if you’re busy with your job, your children, or otherresponsibilities, or you don’t feel comfortable making important financialdecisions on your own, then you may need professional advice.  Financialprofessionals offer a variety of services at a variety of prices. It pays tocomparison shop.

While most financial professionals are honest andhardworking, you must watch out for those few unscrupulous individuals.  Evenif a financial professional has been recommended by friends and others youtrust, we encourage you to thoroughly evaluate the background ofany financial professional with whom you intend to do business.  

Before you hand over any portion of your lump sum payment,make sure your financial professional is licensed, and always check and see if thefinancial professional or his or her firm has had run-ins with regulators orother investors.  
Check Out a Financial Professional
You can verify abroker’s disciplinary history by checking the Central Registration Depository (CRD).Either your state securities regulator or NASD can provide you with CRDinformation. Your state securities regulator may give you more information fromthe CRD than NASD, especially when it comes to investor complaints, so you maywant to check with them first. You'll find contact information for your statesecurities regulator on the website of the NorthAmerican Securities Administrators Association. To contact FINRA, visit FINRA's BrokerCheckwebsite, or call them toll-free at (800)289-9999.

You can find outabout investment advisers and whether they are properly registered by readingtheir registration forms, called the "Form ADV."  You canview an adviser's most recent Form ADV online by visiting the InvestmentAdviser Public Disclosure (IAPD) website.  At present, the IAPDdatabase contains Forms ADV only for investment adviser firms that registerelectronically using the Investment AdviserRegistration Depository.  You can also get copies of Form ADV forindividual advisers and firms from the investment adviser, your statesecurities regulator, or the SEC, depending on the size ofthe adviser.
Have I paid off my high interest credit card debt?
There is no investment strategy anywhere that pays off aswell as, or with less risk than, merely paying off all high interest debt youmay have. Many people have wallets filled with credit cards, some of whichthey’ve “maxed out” (meaning they’ve spent up to their credit limit). 

Most credit cards charge high interest rates—as much as 18percent or more—if you don’t pay off your balance in full each month. If youowe money on high interest credit cards, the wisest thing you can do is pay offthe balance in full as quickly as possible. 
Have I asked enough questions?
As you can tell, we’re really into asking questions.  It’s thebest advice we can give you about how to invest wisely. We see too many investorswho might have avoided trouble and losses if they had asked basic questionsfrom the start.  It doesn’t matter if you are a beginner or have been investingfor many years, it’s never a bad idea to ask questions.  Don’t feelintimidated.  Remember, it’s your money at stake. 

In our "Ask Questions" brochure, you’llfind some questions that you should ask about investment products, the peoplewho sell those products, and the people who provide investment advice to you.  Italso contains some tips on how to monitor your investments and handle anyproblems. 

***

For more information about investing wisely and avoidingfraud, please check out the Investor Information section of our website at www.sec.gov/investor.shtml.  

						Modified:																			April 3, 2006					STAY CONNECTEDTwitterFacebookRSSYouTubeFlickrLinkedInPinterestEmail Updates-  Site Map 
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