Reuters Money

Turn home into a winter wonderland, reap profit later?

Want to kick up your feet no matter how hard the cold weather kicks its heels? With winter on the way, we examine luxury renovations ideal for cocooning. Judge for yourself whether they’re worth a set of blueprints and a stack of greenbacks.

Item: Home theater system

Why you want it: Screening movies in your own theater — complete with rump-shaking sound and a larger-than-life picture — can bring out the Hollywood mogul in anyone. Cost: Estimates vary widely, but figure a minimum of $5,000 for a high-end setup that includes 7.1 Dolby Digital surround sound, at least seven speakers and a subwoofer, amplifiers and a 73-inch rear projection TV that can reproduce 3D and HDTV images. Rich Conklin, a principal engineer with Grand Home Automation in Grand Rapids, says the company’s “Signature Series” surround systems range from $15,000 to $30,000. Value: A survey conducted by Axiom Home Theaters in Dwight, Ontario, Canada found that a 375-square-foot home theater can add $15,000 to $25,000 to a house priced between $150,000 and $350,000. (Those figures apply to both U.S. and Canadian dollars.) However, this is one asset you can take with you to a new home, as many of the components are portable. Did you know?: Music engineer/producer Jeremy Kipnis designed a home theater system that reportedly cost more that $6 million, and incorporates three dozen-plus speakers and a motion-picture screen measuring 18 x 10 feet.

Item: Heated driveway

Why you want it: Who wants to shovel during a snowstorm when you can flick a switch and melt the white stuff away? Cost: About $1,500 to outfit 100 square feet of driveway with radiant heating elements and controls, according to Warmup United States of Danbury, Connecticut. Heated Driveway Systems, a division of Warmzone in Salt Lake City, Utah, estimates operating costs at 28 cents per 100 square feet per hour. Value: A $2,000 investment in a heated driveway equals of 80 man-hours of shoveling, if you paid two local kids $25 each to shovel your driveway for an hour. Did you know?: In some cases, heated driveway systems can reduce the cost of homeowner’s insurance due to reduced risk of accidents from walking on slippery property.

Identity theft among family members affects millions

Two million to three million elderly parents had their identities stolen between 2006 and 2010 by a younger family member for fraudulent reasons including opening lines of credit, according to a new study.

The report by ID Analytics is different from typical surveys on the subject, which only capture what people say. This time, company CTO Stephen Coggeshall says, the figures are based on analyses of 1 billion applications for credit cards and cell phones that showed just how many times younger family members apparently fraudulently used their elder parents’ credit.

“We are literally looking at the entire set of credit-active people in the United States. Even surveys wouldn’t uncover this, because a lot of victims don’t know they’re victims,” he says.  “The realities of familial identity theft are far worse than anything you see in a soap opera. It is the ultimate in family betrayal.”

Identity theft expert Linda Foley, who runs the consultancy ID Theft Info Source says the sad truth is family members steal each others’ identities because they can. “If you want to steal a Social Security number, it’s far easier to steal the information of someone close to you because you have easy access.” And she adds that this is a  grossly under-reported crime because  it’s particularly difficult for the victims to turn in their own children. ”The egregiousness of this crime is the parents don’t feel the need to protect themselves from their own children,” she says.

Laws in most states adds extra penalties when the crime victim is a senior, and on Thursday Senators Amy Klobuchar (D-MN) and Bill Nelson (D-FL) introduced legislation  to protect seniors from fraud by court-appointed guardians and conservators. But legislation hasn’t yet translated into change. Last March when Mickey Rooney testified before Congress about elder abuse, he said he wasn’t a rare case of family members bilking money from older relatives, stealing their identities and committing other types of financial fraud. But what is rare about his case is that Rooney, 91, went public with it, and announced in September that he is suing his stepson and other relatives, alleging years of financial and emotional abuse that cost him millions.

The typical scenario of identity theft of older family members, Foley says, is when an adult child starts helping an elderly parent with the finances. When you’re older, she says, “It’s unlikely you’re going to be checking your credit report all the time. So they remain blind to the crime.”

When an adult child has been put in charge, Foley notes, that’s often who is informed when there’s a suspicion of theft.”If the adult child is the one managing the parents’ finances they’ll simply be told that someone is stealing their parent’s identity and they already knew that,” she says.

Big banks want your big bucks, but you have other options

Big banks just don’t want to sweat the small stuff.

Despite receiving some $4.7 trillion in taxpayer bailout funds, the largest of them are moving more towards wealthy customers with assets to invest and away from low-margin checking accounts. That doesn’t mean you should invest with them, though.

The banks side of things is that that want well-heeled wealth management or brokerage clients, not people who are writing small checks to pay bills. For instance, Bank of America, which recently announced a $5-a-month debit-card fee, said about two weeks later that it was planning to nearly double the number of “Financial Solutions Advisors” for its mass affluent clients.

The growing array of banking fees — common at most big banks now — are a red herring for bankers’ larger agenda of generating more income from advisory and brokerage accounts, as brokerage accounts have the potential to generate hefty commissions and advisory fees.

I suspect that BoA, which recently fell to the second-largest bank by assets, would rather get more customers into its Merrill Edge account. BoA is offering $100 plus up to 30 commission-free online trades to sign up. Just deposit at least $10,000 in cash or securities in their Merrill cash management account first.

What if you have some serious retirement or discretionary money to invest? Are big banks giving you more bang for your investment buck? As you shop for new investments, keep in mind that big banks may continue to raise fees and charge high commissions.

Here are some key questions to ask your bankers if they want your business:

Educated and affluent = potential investing fraud victim

If you’re well-educated and affluent does that make you invulnerable to fraud? Hardly. If you’re willing to make high-risk investments to get high-return, there’s not only a target on your back, but experts say your personality types makes you susceptible to be taken.

“Most of us think of ourselves as invulnerable,” says Shoshana Lucich, of the recently opened Stanford University-based Research Center on the Prevention of Financial Fraud.

A really good con artist has the ability to get buy-in even from people who believe they know better.

“If it sounds too good to be true, you’re probably dealing with an amateur,” Lucich says, quoting Pat Huddleston of The Investor’s Watchdog.

The Bernie Madoff case is an extreme example, but an example nonetheless, of how even well-heeled people can shift their focus to the dollar signs and away from due diligence. Another is  the case of Raffaello Follieri, actress Anne Hathaway’s former boyfriend, who was convicted of ripping off a collection of wealthy victims, including investor Ron Burkle.

The institute, sponsored by the Stanford Center on Longevity and the Financial Industry Regulatory Authority’s Investor Education Foundation, is collecting information and encouraging the study of a variety of frauds, including investor fraud. An estimated $1.7 billion was lost to fraud in the U.S. in 2010. The institute is hosting a fraud summit in Washington, D.C. next month.

Lucich says fraud is a difficult area to get a handle on since a many victims deny being taken. That is widely attributed to their shame and disbelief.

Surveys say: Retirees are getting very nervous

Reference librarians are nothing if not precise, and Kevin Davey plotted his exit from the Chicago Public Library system with all the exactitude of a veteran fact-finder. His last day was Sept. 30 — just 48 hours after his 55th birthday and first day of retirement eligibility.

With his wife still working and the couple’s finances under control, Davey figures that he has the ideal plan in place. All that remains is to land a part-time job with another library to put the icing on the cake. But after submitting close to 20 resumes, Davey hasn’t fielded a single interview.

“I’ve looked for work in bad economies before, but this seems to be more difficult now than it’s been in the past,” he says. “What’s baffling me is that my resume hasn’t floated to the top with all the experience I have.”

If Davey is starting to feel anxious, then no wonder other retirees report financial jitters of historic proportions. The latest Well-Being Index from the Principal Financial Group reveals that 36 percent of retirees — up 15 percentage points from last year — are pessimistic regarding the economic outlook for the rest of 2011.

How do you feel about the economic outlook for the rest of 2011?

• Optimistic
• Pessimistic

Your retirement rollover decision could save you thousands

In the two decades that I’ve been covering personal finance, I’ve worked for three big companies. I like to practice what I preach, like in the video above, where I explain some simple ways that you can manage your 401(k) when you change jobs and potentially save yourself more than $60,000 in about 30 minutes.

The backstory that you don’t catch above is this:

I’ve participated in the 401(k) at each employer I’ve worked at over the years, contributing the most money I could afford and always meeting the threshold to get the prized company match.

But on my way out the door, I’ve always taken my money with me, rolling over my hard-earned retirement funds into another qualified investment opportunity.

Workers have some choices when they leave a job. They typically can leave assets with the former employer, move it to an IRA or roll it into a 401(k) plan at their new job. (They also could cash it out – something I don’t recommend because of the tax penalties and it’s supposed to be there for retirement.)

When I left my last job, I rolled my retirement funds into the Thomson Reuters 401(k). There are a few reasons why: For one thing, I like the control you get when you move your money around. A previous employer offered weak investment choices, most of which were actively managed funds that lagged their peers.

Divorce stress meets recession mess, and women struggle

When Carol Meerschaert of Paoli, Pennsylvania divorced 10 years ago, she experienced first-hand how starting over as a single mom also means managing the money without any help.

Her kids were 7, 10 and 14, and even though she had income as a dietician, “it certainly was very challenging,” Meerschaert recalls. She moved into a smaller home, paid her own mortgage and, in time, funded college tuition for her eldest daughter.

“She had to drop out of school for a year — a school she loved,” Meerschaert says. “I went back to school, too, to get an MBA so I could make more money.” She never lost her house, or her nerve. But other woman aren’t so lucky.

Experts say alarming numbers of women emerge from divorce lacking even the most basic money management skills, to the point where many begin single life as financially illiterate. Meanwhile, the serpentine economy of 2011 has only placed added strain on unhappy couples and divorced women.

A new study by the University of Virginia’s National Marriage Project found that divorce rates have followed the fall and rise of the nation’s troubled economy during the last four years. Between 2008 and 2009, divorce rates dropped significantly as families experienced unemployment and mortgage stress. In 2008, the divorce rate fell 24 percent, and in 2009, 57 percent. The rate is on the rise, however, as the nation slowly recovers from the recession.

“The current economic climate has certainly added more complications to the divorce process,” says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers.

Viken cites a new survey where 85 percent of the organization’s members reported a jump in divorce settlement difficulties since 2008 due to housing debt. That, in turn has impacted child custody cases due to relocation issues, 53 percent of members reported.

Will retailers give debit cards a new life?

As an expert on the credit industry, John Ulzheimer spends his days thinking about credit cards, debit cards and credit scores. So imagine his surprise when he picked up lunch at a restaurant near his house in Atlanta, then later went on a beer run, and was directly confronted with the consumer fallout from the hot-button issue of the day in his profession: new fees for debit card purchases imposed by government regulations.

“The liquor store has an entirely new pricing structure – the cash/debit card price was 5 percent less. And, at the restaurant, for the first time ever, they asked me if I was paying by cash or debit card or credit card, even before I ordered my meal,” he said, and sent along picture at right from the liquor store.

Since the start of October, the credit industry has been focused in on debit cards, as the Durbin Amendment kicked in federal limits on how much card issuers could charge merchants per transaction, and which last week translated into some major banks imposing monthly fees on users for using their debit cards for purchases. Bankrate.com also released a new study that showed reward offers for debit card usage declined 30 percent in the past year.

It seemed as if the industry was conspiring to turn those cards from a popular payment method back into a piece of plastic you only use to get cash from the ATM. And some said good riddance. “There’s absolutely no reason that consumers need to use a debit card. And I was in that camp before this legislation,” said Odysseas Papadimitriou, CEO of credit card comparison site Cardhub.com, which just released its own study on how the new fee limits will affect consumers.

But the end of debit cards as we know them may be forestalled by retailers, as Ulzheimer noticed in his real-world forays. (Bankrate’s senior financial analyst Greg McBride noted also that smaller community banks and credit unions will also keep debit cards afloat, as they are not affected by the Durbin fee structure changes.)

Some merchants are already willing to pass to along to consumer their newfound savings in fees from the bank. Others will not, but may participate in merchant-funded reward programs, which seem to be taking prevalence in the dwindling space overall of reward programs for debit cards.

“It’s a noticeable shift,” said McBride. “We see that 29 percent of offers are now merchant-funded, versus 13 percent last year. It’s a shift you expect not just to hold, but also to continue.”

Online privacy leaks worsen; “Do not track” gains steam

Are you being tracked right now? If you thought you were just browsing aimlessly, doing a little shopping or checking sports scores without identifying yourself, you could be mistaken about your level of privacy.

A new study from a Stanford University researcher has found that a lot of  the little bits and pieces of supposedly anonymous data being deposited by your web browser are actually being gathered and reassembled by dozens of companies and sold. And stopping that from happening takes more than a little bit of effort, helped by a growing movement for “do not track” legislation.

More companies know more about you than previously thought and stopping them from secretly building profiles of you is a lot harder than just pressing a button, researcher Jonathan Mayer says.

He adds:

“Click the local Home Depot ad and your email address gets handed to a dozen companies monitoring you. Your web browsing, past, present, and future, is now associated with your identity… Keep tabs on your favorite teams with Bleacher Report and you pass your full name to a dozen again. This isn’t a 1984-esque scaremongering hypothetical. This is what’s happening today.”

Mayer, of Stanford’s Computer Security Laboratory, says more than half of the sites surveyed share your information with other sites. As an example, he notes that  even when you’re on a typical commercial news site there will be multiple companies collecting information as a matter of course: including the site itself, a video delivery service, advertising networks and social networks.

Previously, privacy advocates suggested that opting out of so-called behavioral advertising was a means of avoiding having your online usage patterns tracked. But Mayer says that stopping targeted advertising doesn’t stop the data collection.

Consumers Union regulatory counsel Ioana Rusu says companies can not only find out who you are and where you’ve been, but also alter offers that you see based on nothing other than the websites you’ve visited — something that can paint a grossly distorted picture of someone. She cited the example of a credit card company that presented different offers to users based on their online profile.

What the Occupy Wall Street crowd should be saying

Are the thousands who have taken to the streets in the “Occupy Wall Street” (OWS) protests a bunch of anarchistic slackers or do they have a point?

If they’re protesting their personal financial situations or prospects for the American Dream, they have plenty to howl about, but the “99 percent” crowds could use some message management.

When I recently visited the Chicago OWS spin-off  in front of the Federal Reserve Bank, they were decrying everything from predator drones to corporations in general.  There were fewer than 100 people there, although their theme was similar to the New York demonstrations.

Instead of yelling at people ensconced behind financial district edifices, though, protesters could be making some more constructive demands. I’d like to humbly offer a few suggestions:

• Demand that big banks give ordinary citizens the same rates they receive from the Federal Reserve on loans. Borrowers can’t re-negotiate their college loans the way a big corporation or bank can, because they have access to interest rates that are nearly zero. Moreover, students can’t consolidate high-rate private loans with lower-rate federal borrowing, so the plums of high finance are out of their reach. Those who graduated from college may be staring down decades of paying off debt — an average of nearly $23,000 per student; those with professional degrees are wincing at six-figure burdens.
• Demand that Congress permit regular folks to discharge student debt in bankruptcy. It’s somewhat of a consolation that graduates can get lower payments based on sparse income or employment if they have federal loans, but they still have to repay those loans. If they file for bankruptcy, they can’t discharge those debts, which are like albatrosses. Not so with the megabanks, who not only received a multi-trillion-dollar bailout, but got the U.S. Treasury and Federal Reserve to buy their bad debt and toxic securities. There’s a solid reason why the delinquency rate for student loans is almost as high as credit cards.
• Demand that Congress pass a stimulus plan to create infrastructure, education, research and clean energy jobs instead of investing in two wars that three-quarters of the American electorate thinks are senseless. If the job market were robust, none of these protesters would have to worry. Like previous generations, they could work, pay off their debts and buy things like appliances, furniture and homes. They could afford to have children and provide them decent educations. That was the American Dream. The younger generation is not getting the job opportunities their parents or grandparents had. They are faced with average 15 percent unemployment. It’s much higher for minorities. Even if they can get a job, wages are depressed due to the recession and many are underemployed, working several jobs or are part-timers.
• Instead of targeting financial districts, focus on specific congressmen and senators blocking financial/bankruptcy reform and job creation.

Unless more people get in the face of politicians, one thing is certain: it will be continue to be a raw deal for the middle class. Now is the time for the protesters to take their demonstrations out of financial districts and into the offices of their elected representatives. All of this reminds me of when Ralph Waldo Emerson visited Henry David Thoreau in jail, who was imprisoned for not paying a poll tax. Emerson asked his friend why he was there. “Why are you not here?” Thoreau replied. Maybe we’re not quite on the streets today in spirit, but most of us were there some time ago in personal financial solidarity — whether we choose to admit it or not.