kiplinger's personal finance

WHAT’S YOUR NAME WORTH?

ON THE STREET, JUST $25 | 88

WHAT TECH STOCKS

NEED TO REVIVE | 60

SPECIAL REPORT: IDENTITY THEFT THE MELTDOWN

March 2001 Vol. 55, No.3 | Founded 1947 | www.kiplinger.com | $2.95

RETIREWHENYOU

WANT

At age 33,Mary Foleycould afford to retire—andstart a wholenew life.

■ Planning your early exit | 38

■ 10 funds and 20 stocks to get you to the finish line | 52

5

COVER

Retire when you wantPhotograph by Kristine Larsen;illustration by Mark Zingarelli

14 | FROM THE EDITOR

How goes your exit strategy?

17 | LETTERS

18 | INDEX

Significant company mentions.

24 | A H E A DThe Fed’s fight against reces-sion . . . What tests will yournewborn take? . . . Borrowingfor business online . . . Person-ality tests return to the work-place. Reviews, page 34.

136 | REWARDS

Kicking a credit habit.

KIPLINGER’S PERSONAL FINANCE (ISSN 1528-9729)

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37 | I N V E S T I N G

38 | Retire When You Want

38 | Exit StrategiesMillions of Americans dream of an early retirement in which the grind of a reg-ular job gives way to the freedom of pursuing happiness. To see how you mightmake that vision a reality, check out these success stories.

48 | Putting a (Rough) Price Tag on Your DreamYou already know that reaching your goal takes some serious saving, but howmuch? Use our worksheet and online resources to plug in your own numbers.

52 | Your Freedom PortfolioSound investments will help Elizabeth Sugg sail into a smooth retirement. Hereare strategies—plus specific funds and stocks—to help you get there, too.

60 | Tech Gets Tough LoveA newsletter editor who missed a lot of technology gains on the way up isavoiding all the losses on the way down—and he’s still not ready to buy.

66 | Weatherproof Your InvestmentsFinding a fund that can work for you in good times and bad is no easy task.Plus: How the 50 biggest funds fared during the Nasdaq bear market.

70 | MORE ON INVESTING YOUR MONEY

A deregulation fiasco and lower interest rates mean juicy bargains in electricstocks (page 70). Picks from the bargain basement (72). How to minimize thetax pain when stocks split (72). Familiar fund winners are missing from ourrankings, and there’s a whole new cast (76). Fund rankings begin on page 73.

| March 2001 | Vol. 55, No. 3 | Founded 1947

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8 Contents kiplinger’s | march 2001

HOW TO REACH USFEEDBACK. To contact our editorialoffices, write to Kiplinger’s Personal Finance, 1729 H St., N.W., Washington,DC 20006, fax to 202-331-7255, or e-mail to [email protected]. Onthe Web, go to www.kiplinger.com andclick on “Contact us.”

Q&A. Have a question? Send it to Q&A,Kiplinger’s Personal Finance, 1729 H St.,N.W., Washington, DC 20006, fax it to202-331-7255, or e-mail it to q&[email protected]. Include your name, address and daytime telephone number.We can’t reply by mail, but we’ll reprintas many as space permits.

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79 | M A N A G I N G

80 | IDENTITY THEFT: The Day They Stole My NameWhen her wallet was stolen, that was just the beginning of our writer’s woes. In the process, she learned valuable lessons that can help you protect yourself.

88 | IDENTITY THEFT: Anatomy of a FraudOld-fashioned pickpocketing is only a fragment of today’s identity-fraud trade.Sophisticated crime rings make millions by stealing others’ good names.

98 | MORE ON MANAGING YOUR MONEY

People collecting long-term-care benefits are glad to have them—they onlywish they had bought more (page 98). Time to refinance? (100). The best waysto settle up with the IRS (102). Cleaning up the CD business (108). For averageloan rates, see page 104; best credit cards, 106; top money-market yields, 108.

111 | S P E N D I N G

112 | Kitchen AidYou might think that great chefs have a hearty appetite for culinary gewgaws,but the ones we talked to favor the minimalist approach. Here’s what JuliaChild, Maida Heatter, Rick Bayless and others consider the absolute essentials.

118 | Nothing But NetThe latest Web-surfing devices offer quick access to the Internet,but nothing more. If that appeals to you, see what we think offive models.

122 | MORE ON SPENDING YOUR MONEY

How to escape the cramped coach and upgrade to first-class (page122). Five cars outfitted for your daily commute into the urbanjungle (126). Power bars or Pop-Tarts? (130).

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| Your interactive personal-finance center

LEARN MORE:Visit www.kiplinger.com in February and March to seethese online enhancements to the magazine.

I N V E S T I N G

Retire When You WantHow much money do youneed to save each month tofinance an early retirement?You can fill out the work-sheet (see page 48) or, ifyou’d rather not do themath, check out our onlineversion at www.kiplinger.com/tools/retcalc2.html.And from our home page,click on “Kiplinger’s Port-folios” to track prices, earn-ings, growth prospects andkey ratios of the 20 stocks fit for a long-term portfolio.

Tech Gets Tough LoveFred Hickey, editor of the High-Tech Strategist newsletter, is the guy money managers and analysts consult to cutthrough the tech-stock clutter. What’s his take on whentech will turn around? Read the Insider Interview, on page60, then go to our home page to hear an audio clip fromthe interview.

M A N A G I N G

Anatomy of a FraudIdentity thieves are increasingly using the Web to stealyour good name (see page 88). Unlisted phone numbers,prior addresses, and even driving records for some states are

available on-line. We’llshow youwhere identitythieves go todiscover sensi-tive informa-tion about you.

INTERACT:Ask our writers and editors questions, read the columns, then give usyour feedback.

Tax-Time HelpKiplinger.com is postingdaily tax tips and hostingfrequent forums to answeryour tax-time questions.You can buy Kiplinger’s Tax-Cut software at our site, too.

PracticalTechKiplinger’s technologywriter, Michael J. Martinez,spotlights products withmore function than flash.

Value AddedSteven Goldberg offers sug-gestions for stock, bond andfund investors looking forvalue in their portfolios.

eConsumerSacha Cohen uncoversthe best services onthe Net.

Ask Kim@KiplingerGot a personal-finance question?Ask Q&A editorKim Lankford.

Dear Dr. TightwadMake your kidsmoney-savvy withadvice from JanetBodnar.

USE OURTOOLS:MANAGE THE WEB Kiplinger-q is a new soft-ware device that stays onyour desktop as you surf

the Web. Besides scrollingfinancial news and quicklinks to the best ofKiplinger.com, you can save Web pages from anysite and read them later—off-line.

FINANCIALNEWSKeep up with personal-finance and business news

with our feeds from AP,UPI and more than 30

other wire services.

YIELDS & RATES Find rates in hundreds

of cities for checking ac-counts, mortgages, CDs,credit cards and more.

CALCULATORS See what the marriage

penalty is costing you, howmuch you can spend onhousing, or whether itmakes sense to refinanceyour mortgage.

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14 From the Editor kiplinger’s | march 2001

Ihope you like what youdo for a living as much as I do.But I suspect that sometimeswe all yearn for the time—andthe independence—to pursue

other interests in the brief period wespend on this earth. Hence, the uni-versal attraction of early retirement.Most of us, however, don’t think of re-tirement as a time to sit on the frontporch and whittle wood. We want toget on with the rest of our lives. Cer-tainly that would apply to the earlyretirees who populate this month’scover package, beginning on page 38.

Mary Beth Franklin, who wrote“Exit Strategies,” says we need a newname for retirement, and I agree. “It’snot about rocking chairs and goldwatches,” says Mary Beth, “but aboutrockin’ and gold medals.” Yet to getto the point of making such a bigchange in your life, you need both in-spiration, which her story provides inabundance, and a plan.

That’s where “Your Freedom Portfo-lio” comes in, on page 52. Senior edi-tor Manny Schiffres offers specific ad-vice on building a nest egg that willpermit you to step out of your presentlife and into a new one. Associate edi-tor Brian Knestout, on page 42, di-rects you to planning resources on theWeb. The worksheet on page 48 letsyou take the measure of your financialprogress. Editorial director Kevin Mc-Cormally oversaw this team effort.

The experience of interviewing andinteracting with cover subjects MaryFoley, Darrel Choate, Joe Bukovskyand Jim King wasn’t lost on MaryBeth. She has no intention of stickingaround to get a gold watch from me.At age 40, Mary Beth took up skiing,and her idea of a new take on life is tospend several months a year as a skiinstructor. In fact, as I write this, she’s

en route to Canada’s Mount Trem-blant, on a winter vacation. Godspeed,Mary Beth, but tell me: What makesyou think I plan on being around tohand you that gold watch?

P.S.: Kiplinger’s Mutual Funds 2001 ison sale on newsstands, with returns for and rankings of more than 2,500funds to January 2. Insightful articlesdescribe the 101 best funds, as well aswinning fund strategies and portfo-lios. The publication is perfect for beginning and veteran investors. Toorder directly, call 888-547-5464 orvisit Kiplinger.com.

HOW GOES YOUR OWN EXIT STRATEGY?

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in training for her

next career.

25

are growing fast and unem-ployment is at a recordlow.”

Economic growth isclearly cooling off from itstorrid pace of the past fewyears. But, says Swonk,“Alan Greenspan wasblamed for one Bush reces-sion; he won’t be blamed foranother.” Look for the Fedto continue lowering rates,bringing the federal fundsrate down to 5.5% or lowerby summer. That would putthe prime rate at no morethan 8.5%—a full percent-age point below where itwas at year-end.

With its surprise rate cutin early January, the Fed“rushed in and grabbed theeconomy before it hit theground,” says Gary Shoe-smith, director of the Cen-ter for Economic Studies atWake Forest University. Asa result, there’s a goodchance that the worst painmay already be over.

The consensus amongforecasters is that growthwill pick up in the second

half of 2001 and registerslightly above 2.5% for theyear. Few expect the econo-my to post negative growthfor even one quarter, letalone the two or more con-secutive quarters that havetraditionally defined a re-cession. Unlike during the1990–91 recession, saysShoesmith, there’s no crisisin banking, no high busi-ness debt burden, no over-building of commercial

finances | Forget the scare talk.

Lower interest rates and higher

wages will LIFT THE ECONOMY,

fending off a recession.

THE FEDPUMPS IRON

The U.S. economy has been

recession-free for so long that it’s hard

to remember what a downturn looks

like. Yet some analysts are speculating

that the r-word is just around the

corner—or, even worse, that we’re in

one already. Odds are we ain’t.

What you’re hearing on TV and

elsewhere is “a very Wall Street–cen-

tered and Washington, D.C.–centered

recession forecast,” says Diane Swonk,

chief economist for Bank One, based

in Chicago. “On Main Street, wages

WHAT’S NEXT FOR YOUR MONEY ■ BY MELYNDA DOVEL WILCOX


Call this a most-

of-your-money-

back guarantee:

Financialmuse.com, an

investing site for women,

will let its brokerage cus-

tomers sell back their

shares commission-free

within 30 days of a trade

if they experience buyer’s

remorse. But sympathy

only goes so far: Custo-

mers are still on the hook

for losses they may have

incurred.

WWW | Cold feet

DONE IN THE SUN

Add another must-have to

your beach bag, along with

your sunscreen and sunglasses: a

dime-size disposable sticker that mea-

sures the total dose of UV rays hitting

your skin. At about 10 cents a pop, it

warns of sunburn by changing color,

signaling when to slather on more

lotion or duck under the umbrella.

The sticker, invented by an Israeli company, will make

its U.S. debut in the spring. You can get it formulated for

use with or without sunscreen, and for six skin tones, de-

pending on how sensitive you are to the sun. It’s not wa-

terproof, but while you frolic in the surf you can attach it

to a towel or beach bag and it will still measure the UV

rays to alert you to your burn threshold. —ERIN BURT

ILLUSTRATION BY DAN ADEL

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space, and no Gulf War.This time, California’s en-

ergy crisis isn’t expected tohave national repercussions.And expectations for corpo-rate profits have dropped solow that investors may bepleasantly surprised by sec-ond-quarter earnings.

Normally it takes six to12 months for the economyto perk up after a rate cut,but this time the lag maybe shorter. Mortgage rateshad actually fallen a fullpercentage point before theFed cut in early January, sorefinancings are well aheadof schedule. Lower energyprices by spring should also put more cash in con-sumers’ pockets.

“I can’t think of one rea-son consumers would stayhome rather than go shop-ping,” says Shoesmith. Ifanyone feels the pinch, it’sthe small slice of investorsmost heavily invested inNasdaq stocks, says JimGriffin of Aeltus Invest-ment Management.

The jobless rate has heldsteady at about 4%, possi-bly because employers arereluctant to part with work-ers who were hard to find.The rate could drift up, but even if it hits 4.5% in2001, that would still rankamong the ten best years ofthe postwar era. “It’s hardto find evidence of reces-sions coming at a time offull employment,” saysJoseph Battipaglia of Grun-tal & Co.

In fact, by year-end theFed may be raising ratesagain, says Griffin. “Themarket will have bottomedout and we’ll find out thatthe economy wasn’t so fun-damentally sick after all.”

Advances in tech-nology have made it possible to test

newborns for more than 40genetic disorders, and if youlive in Wisconsin your babywill be tested for 21 ofthem. If you live in Massa-chusetts, you can choose tohave your child tested for30 abnormalities. Babiesborn in Utah, however, aretested for only three condi-tions. Most states requirehospitals to test for five toeight disorders, includingPKU and congenital hy-pothyroidism, both ofwhich can cause mental re-tardation, and sickle-celldisease.

“Newborns are served in

a very unequal way acrossthe U.S. in terms of screen-ing,” says Dr. Donald

26 kiplinger’s | march 2001

M E D I C I N E | Expanded screening can spot

more GENETIC DISORDERS in newborns.

BABY STEPS TO AHEALTHIER CHILD

DEAD RINGERS

Pity the poor pay

phone. With the

rise of cellular

phones and prepaid call-

ing cards, “we’ve seen a

10% to 14% drop per

year in usage nationwide

over the past three

years,” says Verizon

spokesman Jim Smith,

and the number of

phones has declined by

about 400,000.

Not only are phone

companies removing pay

phones from unprof-

itable locations, they

also are looking for new

ways to make the re-

maining phone booths

earn their keep. Among

the ideas under consid-

eration: turning them

into kiosks for Internet

access, data ports or

electrical outlets.

Don’t worry. If you’re

really in need of a pay

phone, “they will always

be around,” says Smith.

“We will just have to find

new ways to keep up

with the competition.”

—GLEN MAYERS

● Keeping up: Left behind by

cell phones, pay booths could

become Internet kiosks.

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Two private labs

offer supplemental

genetic tests for

newborns. Each charges

$25, but screens for a

slightly different set of

disorders.

Baylor University Medical Center800-422-9567www.baylorhealth.com/newbornscreening

Neo Gen Screening800-892-1288www.neogenscreening.com

TESTS | Where to go

Mattison, medical directorfor the March of Dimes. Yet early testing can make a big difference in detectingconditions that are relative-ly rare and often go unno-ticed under normal circum-stances. For example, ametabolic disorder such asMCAD, which doesn’t al-low the body to burn storedfat properly and affectsabout one in 10,000 babies,isn’t apparent until a childfasts as a result of vomitingor surgery. But if babieswith the disorder don’t con-sume enough sugar, theycan suffer a life-threateningcardiac arrest or lapse into a coma.

Four states—Massachu-setts, North Carolina, SouthCarolina and Wisconsin—already screen for an ex-panded list of abnormali-ties. In Pennsylvania, allbut seven hospitals haveelected to perform the tests,even though the state does

not require them. Hospitalsaren’t charging for thescreening; they typicallycover their costs from thelump-sum fee that insur-ance companies pay forchildbirth.

To help states achieve aconsensus, says Mattison, theMarch of Dimes would likethe federal government todevelop uniform screeningguidelines that states couldadopt, just as it sets stan-dards for immunizations.

In the meantime, twoprivate labs offer supple-mental testing to the publicfor about $25 (see the boxon page 26). Consult yourdoctor before the baby’s duedate so you will have thetest kit when a blood sam-ple is collected for otherscreening tests when yourbaby is born. The Tyler for Life Foundation (www.tylerforlife.com), a parents’advocacy group, is also agood source of information.

S haron Berry gota lukewarm receptionfrom local banks

when she sought a loan toexpand her Stafford, Va.,child-care business by open-ing a second center. Ratherthan scrap her plans, Berry

visited a Web site calledLiveCapital, filled out anonline loan application, andwithin about five minuteswas evaluating competingoffers from several banks.Within two weeks Berryhad her money.


67,000Estimated number of Americans who are at

least 100 years old, a 130% increase from 1990.

834,000Projected number of centenarians in 2050.

82%Percentage of centenarians who are women.

46 AND 48Life expectancy at birth in 1900 for men

and women, respectively.

74 AND 80Life expectancy at birth in 1997 for men

and women, respectively.

122 YEARSAge of Jeanne Calment of France, who was the oldest

recorded person when she died in 1997. She took up fencing

when she was 85, and was still riding a bike at 100.

31%Percentage of earnings you must save every year

to maintain your preretirement income when you start

working at age 20, retire at 60, and live to 100.

—MAGALI RHEAULT

SOURCES: The Brookings Institution, U.S. Census Bureau, Guinness Book of World Records, Harvard Medical School, National Center for Health Statistics

LONGEVITY | Time marches on . . . and on

T H E K I P L I N G E R

MONITOR

B A N K I N G | Lending networks on the

Web give SMALL BUSINESSES more places

to borrow money with fewer hassles.

FAST CREDIT ONLINE

A IS FOR ATTITUDE

High school students in suburban Seattle are get-

ting a new grade on their report cards: an

“employability profile” that assesses the likelihood

that a student will be success-

ful in the workplace. Teachers

grade students on such char-

acteristics as punctuality,

attendance, teamwork and

pride in their work. Students

who achieve an average of 4

or 5 on a five-point scale earn

a “hire me first” card they can

present to potential employ-

ers during job interviews.

Kentwood High School prin-

cipal Doug Hostetter says the grade not only helps area

businesses but could also improve a student’s academic

performance. “Often the cause of poor grades is work

ethic, not intellect.”

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LiveCapital and severalother online companieshave built networks oflenders that small business-es can tap into quickly andeasily (see the box below).In the case of LiveCapital,70 financial institutions belong to the network,among them American Express, Citibank, FirstUnion, G.E.Capital andWells Fargo. Mike Gross-man, LiveCapital’s co-founder and CEO, says its customers value conve-nience and anonymity asopposed to “going frombank to bank and gettinggrilled by a loan officer.”

Real-time credit approvaldoesn’t always replace theintangible value of personalbanking. “When businessowners face difficult timesand they’ve been loyalclients, their bank will bethere for them,” says LorenHerbst, a retired bankerwho counsels small compa-nies as a volunteer with theService Corps of Retired Ex-

ecutives. But if you don’thave such a relationship, or if you have already ap-plied for a bank loan andbeen turned down, “whatdo you have to lose?” saysHerbst.

T he turmoil sur-rounding dot-comshas hit online gro-

cers especially hard. Homedelivery is a painfully sorespot for e-grocers, whomust either recoup their delivery costs by setting ahigh minimum on purchas-

es or risk losing customersby raising their fees.Web-van, for example, has raisedits minimum purchase forfree home delivery from $50to $75 for some Californiacustomers, and Grocery-Works has more than dou-bled its minimum order for free delivery from $25 to $60.

Rather than close upshop, struggling Internetgrocers may be bailed outby traditional supermarkets.Customers will still ordertheir groceries online butgo to a nearby market topick them up. If you preferthe convenience of deliveryto your home or office,

you’ll have to pay for it. Albertson’s, the Idaho-

based supermarket chain,already gives its customersthe option of going to oneof 36 Seattle-area stores to pick up online orders at drive-through sites. Theservice is free for online

purchases of $5 or more.Otherwise, you have to pay$5.95, the same fee cus-tomers pay for a home or office delivery when pur-chases are less than $60.

“People in this businessare throwing spaghetti atthe wall and seeing whatsticks,” says Matt Stamski,an analyst with Gomez Ad-visors, and he thinks thepickup option has stayingpower. “There’s still theconvenience of not havingto walk around the store orstand in line at the check-out counter.” And pickycustomers who prefer to ex-amine their own avocadoscan run into the store.


S P E N D I N G | You can fill your order at

ONLINE GROCERS, but be prepared to drive by a

supermarket to pick it up. By Catherine Siskos

COME AND GET IT

● In Seattle, online-grocery customers collect their orders at Albertson’s.

NOW IT’SDOT-GONE

It wasn’t so long ago

that firms were rushing

to add a “.com” to their

names. Now they’re rush-

ing to rub it out.

Last October, for ex-

ample, UpdateThis, which

makes software to help

clients update their Web

sites, dropped the “.com”

from its name. “We didn’t

want to look like just an-

other Internet company,”

says UpdateThis presi-

dent Bill McCahey.

As early as last spring,

when laggard dot-coms

were still riding the tail of

the craze, “we were ad-

vising companies with

strong business strate-

gies that ‘.com’ didn’t

have to be part of their

name,” says Suzanne

Hogan, a corporate-brand

image consultant with

Lippincott & Margulies.

“The real issue was

whether the business

made sense.”

As Internet companies

mature, cutesy names will

fall by the wayside, and

the .com suffix will be-

come increasingly redun-

dant, adds Hogan. “Al-

most any brand today has

its own Web site.”

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Visit the following

sites to get a

quick thumbs up

or thumbs down on a

small-business loan

application:

www.equalfooting.com

www.livecapital.com

www.primestreet.com

WWW | Cash to go

U ntrained flightpersonnel and inad-equate equipment

are not a healthy combina-tion for passengers who arestricken with an in-flightmedical emergency. In near-ly half of all airborne med-ical emergencies, pilots endup diverting the plane tothe closest airport for help.

To save critical minutesfor patients, as wellas millions of dol-lars for airlines,

more than 30 carriers,including Continental,Southwest and US Airways,use a system operated byMedAire Services that pro-vides in-flight audio andvideo communication di-rectly with emergency-room doctors at a Phoenixhospital. Doctors can in-struct flight personnel onhow to handle emergenciesand help determine whetherto divert the plane.

This spring Virgin At-lantic will become the firstairline to use an enhancedversion of the in-flighttechnology to send temper-ature, blood pressure,blood-oxygen level, EKG,respiratory rate and othervital signs directly to doc-tors on the ground.

MedAire’s 24-hour emer-gency-room call center typi-cally handles about 40 callsa day, a number that has in-creased with the crush of airtraffic. The most commonailment is lightheadedness

or fainting as a result of sit-ting too long and standingup too quickly. Next in line are heart-related com-plaints, ranging from minorchest pain to a full-blownheart attack.

A growing number ofairlines, including Ameri-can and United, voluntarilycarry an onboard automaticexternal defibrillator(AED)—an easy-to-operate,four-pound version of thepaddles hospitals use toshock a heart in cases of car-

diac arrest. Studies showthat for every minute defib-rillation is delayed after apatient collapses, the sur-vival rate drops significant-ly. A Federal Aviation Ad-ministration proposal that’sexpected to pass this springwould require AEDs andbeefed-up medical kits tobe carried on all passengerflights. The new kits wouldinclude an IV unit and flu-id, CPR masks, and a bron-chodilator inhaler for asth-ma attacks.

After fallingout of favor inthe ’70s, person-

ality tests for job candi-dates are making a come-back. Employers that usedthe earlier tests to identifyapplicants with potentialpsychological problemsfound themselves in a heapof legal trouble. But today“the emphasis is on screen-ing competence as opposedto screening out crazy peo-ple,” says University of Tul-sa psychology professorRobert Hogan.

Using multiple-choice ortrue-false questions, thetests help employers findout if an applicant has traitsassociated with top per-formers in a particular job,with the goal of reducingturnover. Texas Instrumentsposts a general question-


T R AV E L | Airlines are saving lives—and

dollars—by keeping SICK PASSENGERS in touch

with doctors on the ground. By Erin Burt

E.R. IN THE AIR

● Safe passage: Airline crews get

training for medical emergencies.

At the Texas Instruments Web site, job applicants

are asked how strongly they agree or disagree with

statements such as these:

I prefer work that allows me free time to pursue my out-side interests.

I prefer work that involves little or no contact with my customers.

I prefer work that confronts me with difficult or complexproblems.

SHOP TALK | What employers want to know

C A R E E R S | Are you

right for the job? Take

a PERSONALITY QUIZ to

see where you stand.

By Catherine Siskos

THEPERFECTMATCH

naire on its Web site to de-termine whether potentialapplicants will fit into thecorporate culture (see sam-ple questions below). Othercompanies administer de-tailed in-house tests thatvary by position.

Traits sought by employ-ers aren’t always obvious.For example, the most driv-en salespeople score low onself-esteem, while introvertsmake the best managers be-cause they don’t waste timesocializing.

ZO

HA

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AR

AG

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CH

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S

37

Investing■ BULLISH SIGNAL: The Fed’s half-point rate cut

on January 3 won’t be the last. Before the Fed is

through, cuts could total at least 1.5 percentage

points. ■ NASDAQ NAILED: For all but the largest

stocks, it costs more to trade Nasdaq stocks than those

on the Big Board, a government study finds. That’s

because of wider bid-ask spreads for Nasdaq issues.

■ INDEX BEATER: Legg Mason notes that Bill Miller’s

Value Trust fund topped Standard & Poor’s 500-stock

index for the tenth straight year. Still, the fund lost

7% in 2000. ■ LOADED FOR BEAR: ProFunds UltraShort

OTC is the top anti-tech fund, up 113% during the

Nasdaq bear market from March 10 through January 2;

among traditional funds open to new accounts, the

leader was UAM Clipper Focus, up 73%. For more on bear-

market results, see page 66. ■ CANINES CROW: After

several lackluster years, investing in the Dogs of

the Dow--the ten highest-yielding stocks in the Dow

industrials--paid off last year. Helped by a 91% rise

in Philip Morris, the dogs gained 6% in 2000. The Dow

lost 5%. ■ FIVE-STAR FIASCO: Stock funds that began

2000 with Morningstar’s coveted top rank lost 17%, on

average, last year. Funds that began the year with one

star gained 5%. ■ PARSIMONIOUS PAYOUTS: S&P 500

dividends will be flat or up slightly in 2001, says

S&P. Payouts on the index dropped 2.5% last year, the

biggest decline since 1951. ■ ROLLER COASTER: Ken

Heebner’s CGM Focus fund soared 44% in the last quarter

of 2000 by selling short high-tech stocks. But then, in

the first two weeks of 2001, Focus sank 20%.

ALL ABOUT STOCKS, BONDS AND MUTUAL FUNDS


SCENE ON WALL STREET

Ma Bell is loved again:This may be a good time tocheck out long-distancestocks. The group was dead

last among Standard &Poor’s 112 sectors in 2000.But, as is often the case,sellers may have gone a bitoverboard.

The stock that has sud-denly captured Wall Street’sfancy is AT&T, which sank66% last year and recentlycut its dividend for the firsttime in history. JP MorganH&Q issued a report in midJanuary suggesting thatAT&T, recently at $24, wasworth $33 based on thesum of its parts. Just daysearlier Morgan StanleyDean Witter had bumpedup its rating from “neutral”to “strong buy.” Both firmssay AT&T’s upcoming four-way breakup could helpboost the stock.

PLASTOCK/P

HOTONIC

A

3938 Investing kiplinger’s | march 2001

cover | Want to jump off the treadmill?

These SUCCESS STORIES show you the way.

By Mary Beth Franklin

Mary Foley is

one of a new breed

of retiree. She

worked as long as

she felt fulfilled

by her job, then called it quits. Having

enough money to fund a retirement that might last far

longer than her career was a key part of the equation. But

the main motivation for saying sayonara was a desire to

have the freedom to do what she wanted, when she wanted.

PHOTOGRAPHS BY KRISTINE LARSEN

● The new look of

retirement: Mary

Foley called it

quits at age 33.

†

RETIREWHEN

YOUWANT

EXITSTRATEGIES


The most obvious thing that sets herapart from most other retirees is herage: She was just 33 when she retiredfrom America Online in 1999.

Her 64-year-old father, Charles Fo-ley, still chuckles over the fact that hehad to leave his dental practice earlyone day two years ago to attend hisdaughter’s retirement party.

Of course, not everyone has the op-portunity to work for a start-up com-pany that grows into a global brand,accumulating valuable stock optionsalong the way. But millions of Ameri-cans share Foley’s vision of an early re-tirement in which the grind of a regu-lar job gives way to the freedom ofpursuing a dream.

A recent survey by the NationalCouncil on the Aging (NCOA) foundthat while one in four workers isshooting to retire by a certain age,seven out of ten hope to call it quits assoon as they can afford to. Basically,they aim for their portfolio rather thanthe calendar to control when they re-tire. The big question is how muchmoney it will take to finance their es-cape from the workaday world.

The goal of this special package isto help you answer that question foryourself and to arm you with the toolsto reach your retirement goal, whatev-er it is. Before putting a price tag onretiring when you want and consider-ing investment strategies and modelportfolios designed to help youachieve that goal, psyche yourself upby seeing how others have pulled itoff. While different events triggeredtheir decisions to retire early, the peo-ple whose stories are told on the fol-lowing pages had one thing in com-mon: They had a plan. Follow theirlead to discover how sticking to a reg-ular investing schedule, reducingdebt, setting retirement goals, andmaking smart decisions about manag-ing your money can work for you.

Hear that ticking? Every seven sec-onds another baby-boomer turns 55.As the members of this demographictidal wave approach retirement, theywill increasingly challenge the defini-

tion of the term that once meant atime to slow down and stop working.

“In the 21st century, retirementwill encompass a wide range of op-tions,” observes Neal Cutler, directorof research for the NCOA’s survey onthe Myths and Realities of Aging2000. “Retirement used to be definedas what one was no longer doing—notparenting, not working, not being ac-tively involved. Increasingly, it will bedefined by what one does do—secondcareer, volunteer work, travel, sportactivities.”

Right place, right time

W hen Mary Foley, freshout of college, accepted ajob in the customer-service

department of Quantum ComputerServices, she figured she’d stay a fewmonths to earn some pocket moneybefore looking for a real job. But shegot caught up in the enthusiasm ofthe small firm that grew into AOL.

When she started in 1988, she wasone of about 120 employees, most ofwhom received stock options as a re-ward for signing on and additional op-tions over the years. By the time sheleft in January 1999, she was incharge of corporate training for a com-pany that employed more than 12,000people. She enjoyed the challenge ofbuilding an organization from theground up so much that she decidedto pursue a graduate degree in organi-zational development. Her stock op-tions, now worth millions, were herticket to a new life.

Foley exercised all of her remainingoptions in one smooth transaction,sold the stock, then parked several

million dollars in a money-marketfund while she contemplated her nextmove. She turned to Stephen Park, aninvestment adviser with A.G. Ed-wards in Washington, D.C., to helpher establish a diversified portfolio ofstocks to be monitored by professionalmoney managers. They also created aladdered bond portfolio to generateabout $70,000 a year while sheworked on her master’s degree at Pep-perdine University, which she com-pleted in August 2000.

“I want to be a good steward of thismoney, but I don’t want to spend 40hours a week focusing on finances,”Foley says. “I define retirement as be-ing able to choose what I want to doand how I want to spend my efforts ata pace that I enjoy.”

After graduating, she cashed inmost of the bonds, using some of themoney to invest in an online start-upcompany, HumanR, where she spendstime as a hands-on board member.She’s also writing a book about herdecade at AOL, where gender and ex-perience took a backseat to innovationand enthusiasm. Foley hopes it will bea guidepost for women working in thenew economy.

Gone fishin’

J oe Bukovsky of Plainfield,Ill., had always hoped to retireearly, and an attractive buyout

offer presented him with the opportu-nity sooner than he expected. In 1993,Upjohn offered Bukovsky, a pharma-cist in charge of monitoring drugstudies, two choices: a $500,000 lumpsum or an annuity worth $2,000 amonth for the rest of his life. He was54 years old.

His wife had died of cancer a fewyears earlier, and Bukovsky knew hewanted to spend more time with histhree grown sons and pursuing his fa-vorite hobbies of fishing and hunting.He was anxious to take the early-re-tirement offer, yet wherever he turnedfor professional advice, the answer wasthe same: He was too young.

The chief impediment, he was told,

For many workers,

the goal is for their

portfolios, not the

calendar, to control

when they retire.

41

was that rolling the half-million-dollar buyout into an IRA would lockup the money until he was 591⁄2. Whatwould he live on in the interim? Fi-nally, Bukovsky found an adviser whoknew a way around the problem.

Tapping an IRA before age 591⁄2normally exposes you to a 10% early-withdrawal penalty on top of the in-come taxes you owe, meaning youcould lose about half your money totaxes and penalties. But you can avoidthe penalty by setting up a schedule ofsubstantially equal payments based onyour life expectancy. As long as thatpayment stream lasts for at least fiveyears and until you’re at least 591⁄2,

there’s no penalty on the payouts.Therese Mayer, an investment

adviser with A.G. Edwards inNaperville, Ill., showed Bukovskyhow setting up such a payout schedulecould help him reach his goal. (If youhave a 401(k) at work, that same 10%penalty generally applies to with-drawals before age 591⁄2. But in whatcould be a boon to early retirees, thepenalty disappears at 55 if you leaveyour job and get the money after youreach that age.)

Following Bukovsky’s “retirement,”he initially worked part-time as apharmacist and consultant, earningless than half of his $100,000 former

salary. But in 1998, at age 58, hestopped working altogether and start-ed withdrawing funds from his IRA.For maximum flexibility he actuallycut his IRA into two accounts, one tofund the $45,000 annual payments heneeded, the other to continue to growundisturbed. He must continue tomake the steady withdrawals from theone IRA until age 63 to satisfy thefive-year rule. Now that he is over591⁄2, he can withdraw money from theother IRA any time he wants withoutpenalty. Both accounts, which are in-vested about 80% in stocks and 20%in bonds, earned better than 13% ineach of the past three years and are

● Darrel Choate retired

two years ago at age 55,

as soon as he qualified for

retiree health insurance.


If you’re navigating your

retirement ship on your

own, plenty of Internet sites

clamor for your attention. But

you don’t need to dock at

every port of call. Instead, go

directly to the 401(k) Advisor

at Quicken.com (www

.quicken.com/401kadvisor).

Run by TeamVest, a Char-

lotte, N.C.–based investment

adviser, this comprehensive

retirement-planning site cov-

ers more than just 401(k)

plans. Its retirement calculator

is designed to take all your re-

tirement assets into account

and tell you the odds that

you’ll reach your retirement

goal, depending on different

investment allocations.

Like many of its competi-

tors, Quicken’s 401(k) Advisor

calculates those probabilities

using a Monte Carlo simula-

tion, which churns out hun-

dreds of possible outcomes

using random returns for dif-

ferent asset classes. The sys-

tem produces better estimates

than those that assume your

investments will earn a steady

10% year in and year out (they

won’t). And like its competi-

tors, the site offers a handy

“what if” tool. It lets you ad-

just a handful of variables—if,

say, you set aside more each

month or choose higher-risk,

higher-return investments—to

see the impact of such

changes without enduring the

questionnaire again.

A standout feature of the

site is its specific recommen-

dations of where to invest

your retirement money based

on the choices inside your

401(k) plan and other retire-

ment vehicles, and the amount

of risk you’re comfortable

with. That’s something other

sites do only by subscription.

The specific offerings of about

1,100 plans are loaded on the

401(k) Advisor system. If your

plan isn’t one of them, you can

input your own retirement-

plan options.

But that’s not the site’s best

feature. The 401(k) Advisor

has a staff of living and

breathing financial planners

on hand to speak with Web

surfers via online instant-

messaging boxes (or, if you

have a second line, by phone).

This feature enables you to

get answers on how to make

the calculator work and to

sort out any problems with a

financial planner who is look-

ing at the same computer

screen you are—a service that

no other site offers. These

consultations are free.

When we tested this fea-

ture, our conversation didn’t

break new ground, but the ad-

vice was sound and reason-

able. Another plus: quick re-

sponse from customer service.

When one of our question-

naire responses caused the

Web page to return an error,

TeamVest replied to our e-mail

within the hour with a fix.

For $19.95 a month, you can

get ongoing monitoring of

your plan—including quarterly

updates and recommenda-

tions and unlimited access to a

personal adviser. But if you’re

comfortable noodling around

with investment options on

your own and don’t feel the

need to have an adviser eagle-

eye your portfolio, you’ll find

the online calculator a valu-

able tool for charting your

course to retirement.

For computerphobes. Even

in the 21st century, everyone is

not online all the time. But

lack of an Internet connection

doesn’t lock you out of getting

retirement-planning help. As

baby-boomers reach their

fifties, financial planners are

expecting a booming business.

Most planners have tradi-

tionally worked as solo practi-

tioners or in small partner-

ships catering to wealthy

clients. But now a number of

big firms offer low-cost or

even free planning to the mid-

dle class. To test these offer-

ings, we enlisted a Michigan

couple to ask four planners to

massage their early-retire-

ment dream. We paid the cou-

ple’s expenses, but they didn’t

tell the planners that they

were our stalking horses.

Charges vary, but our cou-

ple paid $600 for retirement

planning from American Ex-

press, $500 to Vanguard,

$250 to Merrill Lynch, and

nothing to Prudential. In each

case, the planners used PC

programs to generate financial

plans, but our couple never

had to sit down at a keyboard.

We considered the plan pro-

duced by Merrill Lynch to be

the best; its planner met with

the couple three times. The

American Express and Pruden-

tial planners also met person-

ally with the couple, but Van-

guard’s program involved only

telephone consultation.

—BRIAN P. KNESTOUT

WWW | Virtual and real-life help in your quest

SE

AN

KE

LL

Y

GOLDWATCH.COM

43

worth more than $1 million today.Mayer notes that the stock-market

stumbles of 2000 highlight the im-portance of diversifying your portfolio.Diversification allowed Bukovsky tosell off bonds to fund withdrawals.“We wouldn’t want to be selling offstocks now,” she says.

Health and security

An important element inBukovsky’s early-retirementpackage is health insurance.

His company continues to pay for thebulk of his medical coverage untilmedicare kicks in at age 65. His out-of-pocket cost is only $60 a month.

Indeed, the cost of health insurancecan be a make-or-break issue for earlyretirees. Despite a general belief thatexpenses will decline in retirement,health insurance can cost hundreds ofdollars a month. If your previous em-ployer has more than 20 employees,the company is required by federal lawto let you continue your group cover-age for up to 18 months. Some stateshave similar laws for smaller employ-ers. But such coverage is not cheap.You generally have to pay the entirebill yourself plus up to 2% in admin-istrative charges. You might find abetter deal by shopping on your own(see “The Best of Health,” Feb.).

Bukovsky plans to start taking so-cial security benefits in July when heturns 62, which will increase his in-come by about $12,000 a year. Forhim, claiming benefits at 62—ratherthan waiting until his “normal” retire-ment age of 65 and four months—willmean accepting 22% less than if hewaited until his normal retirementage. But that’s part of the plan that ismaking his early-retirement dream areality, and if he lives until he’s atleast 72, he’ll actually come out aheadfinancially, too.

“I couldn’t be happier,” Bukovskysays of the leisurely pace of his life. “Ihave a house on the lake and fish al-most every day in the summer. I visitmy parents, babysit my grandchil-dren, and spend time with my sons

and my friends. I just wish I couldhave done it at 40.”

Part of a grand scheme

D arrel Choate, an engi-neer who spent more than 20years working for Boeing,

never left much to chance. In his for-ties, he knew that he wanted to retireas soon as he could. That time cametwo years ago, when he turned 55.

“Two things happen at Boeingwhen you turn 55,” Choate says. “Youcan draw a pension and you becomeeligible for retiree health insurancethat they will pay for until you andyour spouse turn 65.”

“I had spent 31 years in the aero-space industry,” he says. “I wanted totry other things.” Besides, he knewtoo many people who waited until 65to retire and then discovered theyweren’t healthy enough to enjoy it.“What happens to people between the ages of 65 and 90 is not a prettypicture.”

Since retiring, Choate, an avid hik-er, has trekked across New Zealandand visited Israel as part of an ecu-menical studies program at a localuniversity. He spent the past twosummers fixing up a summer home inMontana, and he and his wife, Robin,recently returned from a trip to Italy.

But long before they set off on theirretirement adventures, they crunchedthe numbers and established goals tomake their dream happen on theirtimetable. The key was spending lessthan they earned and socking moneyaway in both taxable brokerage ac-counts and Darrel’s 401(k). Once theirtwo children had graduated from col-

lege, they kicked their savings planinto high gear.

“We were able to save about 25% of our income over the last five yearsbefore retirement,” Darrel says. Theyalso paid off their mortgage shortly after he stopped working.

That’s a good plan, says Mike Stark,an investment adviser in Marietta,Ga., who specializes in retirementplanning. “It all comes down tolifestyle and monthly cash-flow re-quirements,” he says. “If the house ispaid off, you pay cash for your vehi-cles, and the kids are through college,you have just taken care of the threebiggest-ticket items that most Ameri-can families face. Once you have thosecosts taken care of, retiring early is notgoing to be a problem.”

For now, the Choates live comfort-ably on Darrel’s $2,000 monthly pen-sion and $1,000 a month drawn fromtheir brokerage account. They don’tplan to touch the retirement savingsthat built up in the 401(k) and havesince been rolled over into an IRA.But because the pension is not in-dexed to inflation and will thereforebe less valuable in the future, the cou-ple will gradually have to rely moreheavily on savings.

It’s generally wise to spend savingsin taxable accounts first. For onething, part of that money will come toyou tax-free (because it’s a return of al-ready-taxed funds). Also, long-termcapital gains realized in a taxable ac-count are taxed at just 20% if you’veowned the asset for more than a year.Starting in 2006, there will be an evenlower rate—18%—for assets ownedmore than five years. Tapping taxableaccounts also lets your retirement as-sets continue to grow tax-deferred un-til you need them or must by law startwithdrawing funds at age 701⁄2. All re-tirement-plan withdrawals, except af-ter-tax contributions or Roth-IRAfunds, are taxed in your top income-tax bracket.

While Darrel and Robin plan tostay in their mortgage-free home fornow, they are prepared to move into

The cost of health

insurance can be

a make or break

issue for early-

retirement plans.


something smaller if they need to.Such downsizing can play a powerfulrole in an early-out strategy, says LesAbromovitz, author of You Can RetireWhile You’re Still Young Enough to EnjoyIt (Dearborn Financial Publishing,$17.95). The law permits marriedcouples to sell their home and pocketup to $500,000 in profit tax-free($250,000 for individuals), which canbe added to the retirement nest egg.

One step at a time

J im King is an example of thelatest workplace trend: phasedretirement. In a series of job

changes over the past seven years, he

has moved from full-time security an-alyst to part-time trust officer to full-time alpaca breeder and farmer.

“I’m doing something I really en-joy,” says King, 65, who along withhis wife, Sue, owns Skyeview Alpacas,in Elkins, N.H. “I was able to transi-tion gradually to a new lifestyle.”

The transition began in 1993, whenKing was “downsized” out of his posi-tion as a security analyst for the Pio-neer Group of mutual funds. At 58,King participated in an outplacementprogram run by New Directions. Un-like most career-counseling services,which focus on finding participants a new job, New Directions helps

midlife professionals design the nextphase of their lives.

“We’re not career coaches,” saysDave Corbett, president of New Di-rections. “We’re opportunity develop-ers.” Since launching his company in1986, Corbett has witnessed a grow-ing trend toward early retirement, butnot in the traditional way. “Peopledon’t want to stop—they want to slowdown,” Corbett says. “It’s not aboutwhat you want to be when you growup. It’s what you want to do when yougrow up.”

King spent nine months in theNew Directions program, which in-cluded an in-depth assessment of his

● Raising alpacas full-time

is the latest step in Jim

King’s phased retirement.


talents, values and goals. The serviceincluded introductions to recruitersand angel investors who might fund astart-up business and administrativesupport and office space for as long ashe needed it. The fee (which was paidby King’s former employer) is general-ly 15% to 18% of the executive’s for-mer salary, with a minimum charge ofabout $30,000. While the New Di-rections philosophy of finding a stim-ulating part-time position to allowmore time for personal pursuits wasappealing, King found it wasn’t easyto create that kind of position. “Youcan’t just walk into a company off thestreet and say, ‘I’d like to work twodays a week.’”

The first stop on his way to a newlife was a full-time job as a trust offi-cer managing investment portfoliosfor a Boston law firm. He kept anapartment in the city where he livedduring the week, while his wife stayedon the farm in New Hampshire thatthey had bought a few years earlier.The law-firm job gave him the experi-ence he needed to land a position witha New Hampshire bank’s trust depart-ment, which allowed him to move tothe farm full-time. The next step inhis phased retirement was to turn thatposition into a part-time job.

Then last August, one day after heturned 65, King finally “retired.”Now he and Sue stay busy raising,selling and showing their alpacas,smaller cousins of the South Americanllama that are bred for their soft,warm fur. They started with three ani-mals and now have 60, which they of-ten take to local nursing homes forfriendly visits.

Throughout his phased retirementJim was earning a salary, allowing hissizable investment portfolio and re-tirement accounts to grow. The Kingspaid off their mortgage, have no debtson the farm, and haven’t had to touchtheir IRAs yet. Jim has started collect-ing social security and qualifies formedicare, but because Sue is younger,they joined the local farm bureau as away to purchase affordable group

health insurance for her.“I have the financial resources to be

comfortable doing nothing, but I’mdoing something I really enjoy,” Jimsays. “It’s productive, and it could bequite profitable if it continues likethis. But that’s secondary to the enjoy-ment of doing it.”

Designing your plan

C reating a budget for howmuch you plan to spend andtallying up your sources of in-

come is the best way to see if you areon target to retire early or in danger offalling short of your goal. On page 48you’ll find a worksheet that will giveyou a rough idea of whether you’re ontrack or what it will take to put youthere (or go to Kiplinger.com for anonline version that does the math foryou). If you’re willing to spend moretime, on page 42 we direct you towhat we consider to be the best Website for pinpointing how much youneed to save.

If you are close to taking the early-retirement plunge, another Web-based service can offer a valuable reali-ty check. T. Rowe Price’s RetirementIncome Calculator (www.troweprice.com/ric) focuses exclusively on howmuch you can afford to spend in re-tirement without fear of outlivingyour money.

The calculator simulates 500 poten-tial market scenarios to estimate theprobability of maintaining your de-sired retirement income based on thesize of your nest egg and how it’s in-vested. If you’re looking for more-de-tailed analysis, consider the company’sRetirement Income Manager program

(which costs $500) or hire a financialplanner who can do a similar analysis.Such an adviser can customize an in-vestment strategy and recommend anappropriate withdrawal rate so youdon’t outlive your money.

Connie Andrews of Baltimore filledout the extensive T. Rowe Price ques-tionnaire and was delighted to findthat she could afford to retire at age50 from Bell Atlantic after more than30 years on the job.

Beginning in 1992, when Andrewswas 42 years old, Bell Atlantic wentthrough a series of mergers and reor-ganizations that placed her job injeopardy several times over a three-year period. So she tightened her beltand gave up the opera and symphonytickets that she loved, preparing forthe lean times ahead. Andrews foundshe could live on a lot less than sheearned. She socked her savings awayinto retirement accounts, investmentaccounts and tax-free bond funds.

After three years, her job situationstabilized, but Andrews continued tomaximize her savings with an eye onearly retirement. By the time she re-signed in June 2000, she had accumu-lated about $375,000 in taxable ac-counts, IRAs and her 401(k). Alump-sum payout from her company’scash-balance plan added another$276,000 to her retirement stash.

She rolled the entire package intothe T. Rowe Price Retirement IncomeManager program, where it’s investedabout 85% in stock mutual funds andthe rest in bond funds. She withdraws$3,000 a month from the account,about 40% of her previous salary, andcontinues to work part-time as a con-sultant. The $500 fee for the T. RowePrice program entitles her to free an-nual reviews of her plan.

“All the financial guidelines sug-gest you need 70% to 80% of yourpreretirement income,” says Andrews,who celebrated her retirement and her50th birthday with a trip to Italy.“That’s not necessarily true. Youmight need a lot less.” —Reporter:KATHY JONES

A stimulating part-

time job can be

the key to phasing

your way into an

early retirement.

8180 Managing kiplinger’s | march 2001

When I f irst glanced into my purse and

noticed that my wallet wasn’t there, I

thought I had lost my mind rather than

the wallet. Only days earlier, I had mis-

placed the same purse and gone through

the nuisance of flagging checks and replacing IDs—only to find the

darn thing, its contents intact. Surely, I thought as I headed out the

IDENTITY THEFT//ONE FAMILY’S STORY

ILLUSTRATIONS BY MARK ZINGARELLI

THE DAY THEY

STOLEMYNAME

crime | A MISSING WALLET

sets off a chain of horrors that,

months later, remain a threat.

By Jane Bennett Clark


door to run a quick errand, the walletwould turn up.

But this time the wallet really hadbeen stolen, along with my creditcards, my checkbook, my identifica-tion and my sense of security. Thievesused the information to raid my fami-ly’s accounts of thousands of dollars.Although the bank and credit cardcompanies ultimately bore the finan-cial loss, the experience cost us hourstrying to straighten out the mess, andtook an emotional toll from which myfamily is still recovering.

Worse yet, we can’t be sure that myIDs won’t be used in the future to runup bills, borrow money—or even com-mit more serious crimes. “You justdon’t have a clue,” says Betsy Broderof the Federal Trade Commission,which tracks complaints about identi-ty theft. “This is an invisible crime.”

It’s also a prevalent crime. Aboutone in five American families was af-fected by identity theft over the pastseveral years, according to a surveyconducted for Image Data LLC, a firmthat sells point-of-service security sys-tems. This is the story of how my fam-ily became a statistic.

Growing alarm

W hen I returned frommy errand that day lastspring, I received a phone

call from the Visa fraud unit that con-firmed my loss. “We noticed you’vehad a lot of activity on your Visa ac-count recently,” said a cordial voice.Members of the fraud unit, employedby the bank that issues my Visa creditcard, use software to track suspicioustransactions.

Our recent charges—a few restau-rant bills and the cost of a new suit for my husband, Chris—were hardlyworth noticing. But the Visa transac-tions the investigator recited certainlywere eye-openers: almost $400 in fare-cards on our local subway system and$536 for a train ticket, all during thepreceding 24 hours—and all purchas-es that could be made by machine.

I replayed the events of the previous

evening in my mind. I had used mywallet before entering the subway insuburban Maryland on my way to anart exhibit in downtown Washington,D.C. The platform where Chris and Ihad joined up had been unusuallycrowded, as had the escalator to exitthe station. Apparently, my wallet hadbeen lifted by someone in that jostlingcrowd.

The Visa investigator canceled mycard, arranged for a new one, and as-sured me we wouldn’t be liable for thecharges. By law, losses due to creditcard fraud are generally limited to$50, and most companies waive alllosses. After taking care of the Visa ac-count, the agent advised me to cancelany other cards.

Our only other plastic was an ATM card with an off-line debit fea-ture that allows us to make purchasesusing a signature. I called the “800”number for my bank—and listenedwith growing alarm as a bank employ-ee recited a litany of unfamiliar trans-actions on my card, including morehigh-priced train tickets and com-muter passes. As the total climbed tomore than $2,000, even the agent wassympathetic. “I feel sorry for you,” hesaid.

Because my PIN hadn’t been in mywallet, I surmised the thieves musthave forged my signature or bypassedthe requirement by making purchasesat machines that didn’t require a PIN.

Again, I was assured by the agentthat the card would be replaced andthe transactions wiped out. But this

A bank agent

recited a litany

of unfamiliar

transactions.

“I feel sorry for

you,” he said.

Last year the Federal Trade

Commission’s identity-theft hotline

(877-438-4338) logged more than

27,000 calls from people asking for help

with lost or stolen identification. If your

wallet or IDs fall into the wrong hands,

take these steps:

Replace your credit cards. Ask for new

cards and examine your next statements

carefully. The federal Truth in Lending Act

limits consumer liability for unauthorized

charges to $50 as long as you contact the

creditor in writing within 60 days of the

date the bill was mailed. Visa and Master-

Card waive liability regardless of how

much time has elapsed.

Replace your ATM and debit cards.

Under federal law, your liability for unau-

thorized debits is limited to $50 if you

contact the bank within two days of losing

your debit card. You’re liable for up to

$500 if you wait as long as 60 days to re-

port the fraud after receiving your bank

statement. Beyond 60 days, you could be

left holding the bag for whatever amount

is withdrawn from your account. Visa and

MasterCard waive liability for bank cards

under their umbrella no matter when you

report the loss.

As for reimbursing your money, banks

can take up to ten business days to pro-

vide provisional credit in cases of debit-

card fraud, although many provide the

credit within five days. Visa guarantees

reimbursement within five days for bank

cards in its system.

As an added safeguard, some banks

will put your photo on your bank card at

your request, or give you the option of re-

moving the signature-based feature.

Close your checking account. If your

account number or checks are in circula-

tion, stop payment on the checks and

WHEN YOU’REROBBED OF YOUR IDENTITY

83

close the account, and ask that a pass-

word be assigned to your new account.

Don’t use your social security number or

your mother’s maiden name as identi-

fiers; both are often available in public

records. And definitely read your state-

ment to make sure everything on it is

yours.

Generally, state laws hold banks re-

sponsible for losses resulting from a

forged check as long as you notify the

bank promptly that your checks have

been lost or stolen. You may have to wait

anywhere from a few days to several

weeks for reimbursement while bank in-

vestigators pursue the case.

If a store refuses to take your check

because it says you bounced checks, ask

which check-verification agency reported

your name. Then contact that agency

and ask what merchant reported a bad

check in your name. You’ll have to con-

tact that merchant to set things straight.

Contact the major credit bureaus.

Equifax (800-525-6285; www.credit

.equifax.com), Experian (888-397-3742;

www.experian.com) and TransUnion

(800-680-7289) will send you a copy of

your credit report. Review them for unfa-

miliar transactions, and ask that you be

contacted if someone tries to establish

credit in your name. Experts recommend

that you order new reports every few

months for at least a year. One company,

Intersections.com, will monitor the re-

ports for you for $10 a month, or $100

annually.

Call the police. Ask for a crime report

so you can attach it to letters you send to

credit card companies and banks, or use

it to help clear your name if someone

commits a crime using your ID.

Run a background check on yourself.

If crimes are being committed in your

name, they’ll show up on public records

that prospective employers and creditors

use to vet you. Get a report from a pri-

vate investigator, or buy one for $40

from PrivacyScan.com.

Contact social security. The Social Se-

curity Administration discourages fraud

victims from applying for new social se-

curity numbers. Without your old num-

ber, prospective creditors and employers

can’t verify information about your past.

“All of a sudden you have a clean slate,

and you look suspicious,” says Beth

Givens of the Privacy Rights Organiza-

tion (www.privacyrights.org).

But identity thieves could use your so-

cial security number to establish an en-

tirely new identity and earn money tax-

free, a scam that will cause you problems

at tax time or when you collect social se-

curity benefits. To check your earnings

statement, call 800-772-1213. Report any

fraudulent activity by calling 800-269-

0271. If you suspect someone of using

your identification to violate tax laws,

call the Internal Revenue Service at 800-

829-0433.

Don’t carry your social security card in

your wallet, and ask that the number be

removed from other IDs. Some states list

social security numbers on driver’s li-

censes but will substitute another identi-

fier upon request.

Keep records. As if all this paperwork

weren’t enough, you should also keep a

written log of fraudulent transactions,

along with an account of your efforts to

straighten out the mess. The Federal

Trade Commission provides forms and

sample letters to creditors in its publica-

tion ID Theft: When Bad Things Happen

to Your Good Name, available online at

www.ftc.gov (click on “Consumer Protec-

tion,” and then “Identity Theft”).


before to keep it out of harm’s wayduring the lost-purse misadventure.

Perfunctory police

L ater in the week it oc-curred to me to call the police,if not to recover my wallet

then at least to put on record thatsomeone had stolen my identification.There are horror stories aplenty aboutbad guys going on crime sprees usingother people’s identities. Indeed, saysBroder, “people have actually spentnights in jail after having been pickedup on an arrest warrant due to a crimecommitted by an identity thief.”

But filing a police report was noeasy task. The night my wallet disap-peared, I had traveled through severaljurisdictions, none of which wanted toown my problem. And I couldn’t say

for sure that my wallet had been liftedrather than lost. Finally, I persuadedboth the D.C. police and the Mary-land police to assign me a case num-ber. In both instances, the officerswere polite but perfunctory. TheMaryland cop didn’t even take notes.

That’s typical, says the PrivacyRights Organization, an advocacygroup based in San Diego. Police gen-erally consider identity fraud too big aproblem for one department to han-dle, and they deem the real victims tobe banks and credit card companies,which swallow the losses. “It’s a rarecase of identity theft that gets investi-gated and the perpetrators brought tojustice,” says Beth Givens of the priva-cy organization (see “Anatomy of aFraud,” on page 88).

The cops were helpful in one re-

time the theft involved our bank bal-ances, not some future charge on aVisa bill. I would have to visit our lo-cal branch to clear things up. Untilthen, we were out of pocket for theamount.

False security

B y the time I got off thephone I was panicky. Alongwith the Visa and debit cards,

my wallet had contained my driver’slicense, my business cards, my socialsecurity card and a health insurancecard with Chris’s social security num-ber. I also half-remembered stickingan extra checkbook—complete withaddress, phone number and accountnumber—in my purse a few days earlier. It wasn’t there now.

Off I went to the bank to explainfor the second time in two weeks thatmy wallet had gone AWOL. Georgia,the employee who had helped me be-fore, refrained from lecturing as sheput a watch on missing checks,flagged fraudulent debits, and set thereimbursement process in motion.Bank cards issued under the Visa logo,as mine was, guarantee reimburse-ment within five days if the loss is re-ported promptly. Many major banksreimburse even sooner, within two orthree days.

At that point, I learned later, Ishould have closed the account and setup a new one. Instead, hoping to avoidthe onerous paperwork involved inclosing an account—and mindful thatwe had a large check to the InternalRevenue Service outstanding—I keptit open. Georgia put a watch on themissing checks and, in what laterturned out to be the most wishful ofthinking, agreed that the thief wouldprobably toss the wallet now that mycards had been canceled.

Our other funds on deposit—sever-al thousand dollars set aside for a col-lege-tuition payment—were presum-ably safe in a money-market fundunder a separate account number.Ironically, I had stashed the tuitionmoney in the account only the week

85

prise, the checks bounced. Georgiaand I shut down the account and spenthours sorting through bank records.Faxes sent over from the Virginiabranch showed that both checks hadbeen made out to me and deposited inperson to my account, with carelesslyforged endorsements on the back ofeach. The withdrawal, also forged, hadbeen made using a generic bank form.

Staring at a forgery of your own sig-nature is creepy—like glancing into amirror and seeing the face of a stran-ger. As I struggled to maintain mycomposure, I remarked to Georgiathat I would have to take money outof the money-market account untilthis entire situation was straightenedout. She glanced at her computerscreen and gave me a funny look.“Didn’t you already take money out ofthat account?”

I hadn’t. But someone else obvious-ly had. The college-tuition money haddisappeared.

Soon the fax machine produced acopy of another withdrawal slip andanother forgery, this one a bit morepainstaking but phony nonetheless. Ibegan to feel like the victim of a serialmugger, and I was confused as well.How would anyone have known aboutthe account?

Turns out, criminals can uncoverkey financial details by calling thebank and asking leading questions,using an account number or a social-security number to verify identity. De-spite security precautions, bank em-ployees often give out the information

because customers themselves degradesecurity by asking employees to cir-cumvent the rules if, for example, theyhave left their identification at homeor forgotten their account number.

With the account closed, Georgiainstructed me to call everyone towhom Chris and I had recently writ-ten checks and alert them that thechecks would be returned. Our ownmoney would be reimbursed after abank investigation. Because Visa guar-antees didn’t apply to our checking ac-count, the process could take weeks.

Chris spent several evenings sortingthrough statements and reroutingelectronic-fund transfers and automat-ic deposits to a new account. His pay-check, which we now needed desper-ately, was en route to the closedaccount and had to be tracked down. Icalled numerous businesses and triedto intercept checks before theybounced, an embarrassing process thatwas like trying to catch confetti.

For the most part, our affairs havebeen sorted out. The stolen funds werereimbursed after about five weeks, andwe assigned a password to our newchecking account, in addition to aPIN. We considered removing thesignature-based debit feature from ourbank card, but ended up deciding thatthe convenience of keeping it out-weighed the risk. We carry as littleidentification as possible and checkour credit-bureau reports every fewmonths. To protect against future mis-understandings, I keep a copy of thepolice record showing that someoneonce stole and used my identification.

Despite those precautions, we can’tguarantee that my IDs aren’t still cir-culating, or that someone else won’tassume my persona. Nor can wechange the technology that makes iteasy for everyone, including criminals,to gather, track and spend money elec-tronically. As Georgia pointed out,“You can’t stop progress.”

But I can keep my wallet tuckeddeep inside my purse—and leave mycheckbook at home. —Reporter:JOSEPHINE ROSSI

Staring at a

forgery of your

own signature

is like looking in

the mirror and

seeing a stranger.

spect: They urged me to file a fraudalert with the three national credit bu-reaus that track credit applicationsand provide information to potentiallenders (see the box on page 82). The-oretically, if anyone tries to establishcredit in my name or use our existingaccounts, we’ll be notified. But thatsystem has holes, too, says Givens.“The problem is that credit grantorsare not all paying attention to fraudalerts,” she says.

Over the next few days I wrote tothe bureaus and replaced my IDs,while Chris monitored our checkingaccount for the promised reimburse-ment. Sure enough, toward the end ofthe week the balance went back up. Infact, by late Friday afternoon it hadgone way up, by far more than theamount we were owed. “Something’sweird,” Chris said.

On Saturday evening he went out torun a few errands, but returned almostimmediately. “Our checking accounthas been frozen, the balance shows we’reoverdrawn by $750, and I couldn’t getinto the money-market account,” hesaid. “What the hell is going on?”

Despite all our precautions, thethieves were still manipulating our fi-nances. With the bank closed untilMonday, we had no cash, no bank bal-ance and—because we hadn’t receivedthe new Visa card—no credit.

Catching confetti

I was waiting outside the bankwhen it opened at 9 A.M. Monday.Georgia wasn’t in that day, but

the bank manager listened to my sto-ry, pulled up the latest transactions onthe screen, and pointed out two checkdeposits at a Virginia bank branchthat totaled more than $10,000, bothof which had been made a few daysearlier. A withdrawal of $2,300 hadbeen made on the strength of thosetransactions; the crook had probablyused a fabricated driver’s license withmy vital statistics as identification.Now, the account was on hold untilthe two checks cleared.

On Tuesday, to no one’s great sur-

YOUR CONSUMER GUIDE TO BUYING WISELY

111

Spending■ AIR PLAY: More children are flying business class,

prompting American Airlines and British Airways to

add playrooms with slides and games to many of their

airport business lounges this year. ■ FREE ADVICE:

At the Federal Consumer Information Center site

(www.pueblo.gsa.gov), learn dozens of ways to become

a savvier consumer, from news on recalls and frauds

to the latest edition of the FCIC’s Consumer Action

Handbook. ■ LOYALTY HAS A PRICE: Consumers who

replace cars with models of the same make pay too much,

according to Cornerstone Research. The firm found

Buick loyalists pay $1,051 more than people who switch

makes, and Mercedes-Benz loyalists pay $7,410 more.

Brand loyalty apparently trumps the desire to bargain.

■ TRIVIAL PURSUIT: NBC is planning a primetime

game show, On the Cover, in which contestants will

be tested on trivia questions to be framed in giant

covers of magazines, books and CDs--which will also be

sold through the show. In effect, On the Cover could

become one long commercial. ■ STAR POWER FAILURE:

Celebrity product endorsements aren’t as potent as you

might think--only 3% of Americans considered them very

believable in a recent poll by Wirthlin Worldwide.

■ PARK YOUR PICS: Digital-camera owners can now

upload and save their photos free at Kodak.com and

Zing.com--as well as edit and tinker with them.

■ LA-Z-SURFER: Microsoft’s WebTV and La-Z-Boy’s

“Explorer e-cliner” offer a fully wired recliner that

lets you browse the Web and e-mail with your feet up.

Price: $1,000 and up (beverage holder included).


DOLLARS AND SENSE

Rollover roulette: TheNational Highway TrafficSafety Administration hasrated the 2001 cars and

trucks for rollover resistanceand posted the ratings on itsWeb site at www.nhtsa.gov.

The lowest-rated vehicles(one star) are at least fourtimes more likely to rollover than the highest-ratedvehicles (five stars). For ex-ample, the Chevrolet Sub-urban 4x4 got three stars,which means it has about aone-in-four risk of rollingover during a single-vehiclecrash, compared with thefour-door Chevy Blazer 4x2,which received one star—which means a two-in-fivechance of rollover.

By comparison, the four-door Honda Accord passen-ger car got the safest rating,with a less than one-in-tenchance of rolling over.

113112 Spending kiplinger’s | march 2001

Want a recipe for a great kitchen?

That’s easy, says Julia Child: You need

a few good knives, some serviceable

pots, a decent frying pan and several

small appliances. Maida Heatter,

grande dame of dessert cookbooks, adds a perfectly flat baking

sheet to the list. Throw in a couple of gadgets and one beautiful

bowl, and now you’re cooking.

Such restraint goes against the nature of most Americans, who

spent $1.5 billion in 1999 to add a few more gewgaws to their

PORTRAITS BY JAMES SMOLKA

● Rick Bayless, author

and restaurateur, insists

on high-carbon stainless

steel for his cutlery, from

German maker Henckels.

KITCHENAID

home | Puzzled by pots? Bewildered

by blenders? Here’s what some

top chefs say are the ESSENTIALS in

cookware. By Jane Bennett Clark


batterie de cuisine. Professional chefsmay scoff under their big poufy hats at such indulgences, but they are inremarkable agreement about whatconstitutes a minimalist kitchen, andhow to spend their money where itcounts. Here’s what well-known cook-ing experts reach for in their ownkitchens—and what you should con-sider for yours.

Cutting-edge blades

I f Rick Bayless , author ofMexico: One Plate at a Time (Scrib-ner, $35), were setting up shop on

a desert island, he’d bring along a fewgood knives, not to gore wild boar butto make the ceviche and seafood stewfor which the Chicago restaurateur isfamous. His cargo list includes a chef’sknife, a paring knife and a serratedbread knife, as well as a slicing knifeand a boning knife. Bayless’s cutlery is manufactured by Henckels, a top-of-the-line German maker whose forgedchef’s knives run $87 to $134 each.

That’s a lot of dough for a sharpedge, but experts agree that the betterthe knife, the easier and safer the prepwork. “You can spend $85 for a chef’sknife, or you can buy a set for $39.You’re going to notice the difference,”says Mark Edgecomb of Kitchen Etc.,a New England–based chain of cook-ware stores.

For starters, he says, most state-of-the-art blades come in high-carbonstainless steel, a material that resistsrust and pockmarks, sharpens easily,and approximates the fine edge of old-er-generation low-carbon steel. Knivesforged by hand are thicker than thosemachine-stamped from a sheet and are priced accordingly: An eight-inchforged bread knife from Henckels runs$82, compared with $46 for a Henck-els stamped knife.

As for cutting capacity, while thethicker, Western-style blades may feelmore lethal in your hand, considerEastern-style knives, which are honedon one side instead of two. Jack Bev-ington of Sointu, importer of Global

knives, says “the edge is much, much

thinner” than those of Western blades.Michel Nischan, top chef at theHeartbeat restaurant in Manhattan,wields Japanese knives to prepare hisflavor-intense recipes. “Very sharpknives are crucial to us. We’ll shavefresh herbs very, very thin, so that weget the most flavor.” Some companiesmake both Eastern- and Western-styleknives, or adopt features of both.

A good blade, however, representsonly half the purchase; the style andquality of the handle count, too. “It’sobvious that the professional cutlery is much heavier, is much better bal-anced; it feels much more comfortablein your hand” than cheaper knives,says Edgecomb. “A better-balancedand better-weighted knife means lesseffort.” Both Henckels and Wüsthof,another high-end maker, extend thesteel deep into the handle, where it is called a tang, to offset the businessend of the blade and provide heft andsupport. (An eight-inch chef’s knifefrom Wüsthof runs $105 at Williams-Sonoma.)

Picks of the pots

W here does master chefJulia Child get her pots and pans? At the hardware

store, of course: She buys moderatelypriced, heavy-duty aluminum byWearever ($15 to $75 for saucepans,depending on size and style). “You can get these very fancy boutique pots.They cost too much. The Wearever isjust the right weight.” On the otherend of the price—and weight—spec-trum is Heatter’s cookware. Her wallsare hung with enameled cast ironmade by Le Creuset, along with sever-al copper casseroles she calls “wonder-ful and gorgeous to look at.”

Each material has its advantages,but copper is king for conductivity,says Burt Wolf, author of The NewCooks’ Catalogue (Alfred A. Knopf,$35). “Copper accepts heat faster thanany of the other materials, and it alsoloses it faster,” making it ideal for delicate tasks such as heating sauces.Most copper pans are lined with tin or

Deborah Madison, who

specializes in vegetarian

cooking: “There are these

great cheese graters in the shape

of a rasp. They make such beauti-

ful light piles of Parmesan, and

they’re easy to use.” Microplane

grater, at kitchen and hardware

stores; $16.50

Michel Nischan, executive

chef at Heartbeat restau-

rant in New York City: “We

do a lot of juice sauces that thicken

themselves with their own starch

content, such as sweet potato and

corn. To keep them very smooth,

we’ll blend them at the last minute.

With a hand-held immersion

blender, you can stick it right into

the sauce pot.” Cuisinart, at

Williams-Sonoma; $60

STILL LIFES BY ANDRÉ BARANOWSKI

CHEF ’S P ICK | Grater

CHEF ’S P ICK | Blender

115

stainless steel to prevent the metalfrom leaching. (Pots made to meltsugar are usually unlined.) A two-quart copper saucepan from Sur LaTable, the Seattle-based cookwarechain, runs $130 plus shipping atwww.surlatable.com.

Nonetheless, copper and otherhigh-priced cookware constituteoverkill for some chores, says ReneeBehnke of Sur La Table. “If you’reboiling water, you don’t need a $200ten-quart pasta pot. You can do justfine with a $40 pasta pot.” In thatcase, consider aluminum, a light-weight, versatile material that makesfor cookware worthy of . . . well, JuliaChild. Aluminum reacts to heat

quickly and preserves your back whenyou’re hoisting the pan off the stove.Because it reacts to acids, saucepansand skillets of this material are oftenlined, either with a nonstick coat-ing—whose quality has improvedgreatly over the past 25 years—orstainless steel. Anodized aluminumhas been processed to create a low-stick, nonreactive surface.

As for stainless steel, it looks goodand releases food nicely but conductsheat poorly on its own. Some makers,including Wearever, solve that prob-lem by attaching an aluminum or cop-per disk to the bottom of a stainless-steel pan (look for a thick disk thatcompletely covers the surface).

Others alternate several materials to get the benefit of each. All-Clad, forinstance, makes five-ply pans with acopper core sandwiched in aluminumand clad in stainless steel. Says Bay-less, who owns these pans: “They’reeasy to clean, they’re easy to workwith, and they distribute heat incredi-bly well.” And they’re expensive: Atwo-quart All-Clad saucepan runs$200 at Williams-Sonoma. (Wearev-er’s two-quart stainless-steel pan withan aluminum disk costs about $30.)

Similarly high-end—if less high-tech—is Le Creuset’s enamel cast iron,which is heavy enough to stick in theoven and pretty enough to use as acenterpiece. The enamel cooking sur-face holds its own against acidic foods,and because the cast iron retains heat,says Heatter, “long, slow cooking doesbeautifully in this.” She hangs her orange set on the wall and slings thepans like a steelworker. “I just tellmyself it’s good exercise.”

But enamel won’t do for recipesthat require quick heating and fastflipping. For those chores, Heatteruses Berndes skillets, German-madeskillets of cast aluminum with a three-layer nonstick interior that practicallylevitates crepes out of the pan. “I haveso many pans, and all the nonstickthings that have ever been made, butthese are magical,” she says. The skil-lets run $25 to $65, depending on sizeand style, at Williams-Sonoma.

For frying and browning, you’ll alsodo well to inherit cast-iron cookware:“If it’s well seasoned, it’s probably thebest of anything,” says Behnke. Fail-ing a legacy from Grandma, check outthe cast-iron pan by Lodge listed inThe New Cooks’ Catalogue ($10 plusshipping at www.burtwolf.com.)

Best of the baking pans

Anyone who has pried acake from a pan knows thevalue of decent baking equip-

ment. But “decent” depends on whatyou’re striving for. Says Wolf: “On adelicate cake, where I don’t want acrust, I would probably cook in shiny

● Deborah Madison says

her KitchenAid stand mixer

is essential: “I can’t

imagine not having it.”


metallic all the time—aluminum. If I wanted a crust, I would like blacksteel or anodized aluminum.”

In fact, most baking recipes assumeyou’re using aluminum, whose heat-conducting properties encourage levellayers as opposed to the dreaded dome.Heavy-gauge pans, preferred by manyprofessional chefs, run $4 to $12 atSur La Table.

For an evenly browned crust, and aslightly faster heating time, considerheavy-gauge steel. Kaiser’s top-of-the-line La Forme steel bakeware comes instandard and decorative shapes and in-cludes a nonstick finish as insurance($16 to $49). Pans with dark nonstickfinishes, including those made byChicago Metallic, heat the fastest andrequire turning down the oven 25 de-grees to avoid overbrowning.

For baking sheets, aluminum setsthe standard, but you’ll also find somecookie sheets in heavy-gauge steel.Some cooks prefer insulated sheetswith an air buffer that reduces thechances of burned baked goods butproduces a less-than-crisp cookie. Aswith baking pans, dark nonstick sheetsrequire a reduced oven temperature.

Whatever the construction, you’llwant a sturdy sheet that doesn’t warpin the oven or buckle when you take itout. Heatter recently improved on arecipe for melba crackers when she re-placed a 50-year-old baking sheet witha dead-level new one. “I realized all thetrouble I was having was because theold pan was slightly out of shape.” Thenew pan, a jelly-roll sheet by Bridge

Kitchenware, sells for $16 plus ship-ping; cookie sheets, which come intwo sizes, cost $17 to $20 (for a cata-log, call 800-274-3435).

Appliances for the ages

T he chef’s favorite work-horse? Conjure the Cuisinart

food processor. Created almost30 years ago by an American physicistand now as much icon as appliance,this processor chops vegetables,kneads dough, shreds cheese, andwould probably set the table if you

left it on long enough. So reliable—and cost-effective—is the machinethat both Child and Heatter continueto use the original, French-made ver-sion. Recently, Cuisinart introduced a larger, more powerful model calledthe PowerPrep Plus ($425), which

comes with a ten-year warranty.But even the best processor doesn’t

cut it for some tasks, says Child: “Ifyou need to purée something very,very fine, the food processor won’tpurée as fine as a blender will.” RickBayless relies on several blenders tocreate the smooth mixtures he says are“essential for making a lot of Mexicansauces.” He owns an original War-ing—bought 25 years ago for a buckat a garage sale—as well as a recentreissue. The new version, with a 390-watt motor and a five-year warranty,costs $165.

Then there’s the KitchenAid standmixer, a must-have appliance for topchefs as well as novices who think allcakes start with Duncan Hines. “It’slike, if you don’t have one, some-thing’s wrong,” says Mark Edgecombof Kitchen Etc. Although the plane-tary rotation of the beaters can sendlast-minute additions flying andmakes scraping downright dangerous,KitchenAid’s heavy-duty construc-tion, 250- to 350-watt motor andstylish housing render it a classic($240 to $530). Says Deborah Madi-son, author of Vegetarian Cooking forEveryone (Broadway Books, $40): “I’vehad it forever, and I can’t imagine nothaving it.”

Madison also swears by her pressurecooker, a machine that once broughtsuspense—and sometimes explo-sions—to meal making. Improve-ments in design have eliminated thepossibility of eruptions, and the unit’sintense heat reduces cooking times byas much as two-thirds: “You throw asweet potato in a pressure cooker andyou’re sitting down in a few minutes,”she says. “It’s faster than a micro-wave.” Used with a food mill to sortout seeds, skin and stems, this kitchenstalwart also rustles up apple or to-mato sauce faster than you can sayMotts. A stainless-steel pressure cook-er from Kuhn Rikon sells for $150 to$160 at Kitchen Etc.; a Moulinex foodmill is available from www.burtwolf.com for about $20. —Reporter:KATHY JONES

Julia Child, French chef: “A

vegetable peeler is terribly

important. The kind with the

fat black handle works awfully

well.” Oxo Good Grips, at kitchen

and hardware stores; about $6

CHEF ’S P ICK | Peeler

Maida Heatter, cookbook

author: “I have a very large

half of a copper sphere

hanging on my wall, about 15 inches

in diameter. It’s the best thing for

beating egg whites with a wire

whisk.” At Williams-Sonoma, $70

CHEF ’S P ICK | Copper bowl

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