TAKING A HARD LOOK AT AARP'S DEALS THE AMERICAN ASSOCIATION OF RETIRED PERSONS, THE 800-POUND GORILLA OF SENIOR LOBBYISTS, IS UNDER FIRE FOR MAKING MILLIONS. HOW GOOD ARE ITS DEALS? WE RATE ALL 29 FROM APPEALING TO APPALLING.
By VANESSA O'CONNELL AND ELLEN STARK REPORTER ASSOCIATES: MALCOLM FITCH AND LESLIE MARABLE

(MONEY Magazine) – Never in its 37-year history has the American Association of Retired Persons (AARP) been under closer scrutiny. In particular these days, the 32.2-million-member group for people 50 and over, founded by retired high school principal Ethel Percy Andrus largely to sell affordable health insurance to the elderly, is under the piercing glare of Sen. Alan Simpson (R-Wyo.) for two reasons.

First, the outspoken Simpson, who planned to hold hearings about AARP in mid-June, wants to know how "a gorilla" like AARP that reported $382 million in revenues last year can possibly pass for a tax-exempt nonprofit. A full 58% of the total came from endorsing insurance, mutual funds, a mail-order pharmacy and other products created by major profit-making outfits and from ad sales in its magazine, Modern Maturity. "An organization that gets less than 50% of its revenues from dues is easily prone to represent the source of its money, which is business," Simpson says. The Internal Revenue Service wants an answer too. Second, Simpson questions whether AARP should continue to collect federal grants while it lobbies for elderly entitlements (to the annoyance of many Republicans). Last year's take: $86 million.

In their defense, AARP leaders maintain that Simpson is hammering them largely to blunt the group's opposition to Medicare cuts. AARP executive director Horace Deets says that Simpson's charges "are a blatant attempt to keep us quiet" during this summer's nationwide debate about Medicare.

Whether you agree with Simpson or not, chances are you ought to be taking a closer look at AARP too. After all, if you're approaching 50 or you've zipped past it, AARP probably is offering a financial product or service you're thinking of buying. Almost half of the country's 67 million people 50 and over are members. Once you join, you can shop among its 12 insurance policies; eight Scudder mutual funds; fixed annuities; 15.9% or 17.9% Visa or MasterCard; mail-order pharmacy; Amoco auto club; or car rental and hotel discounts. And there may be more coming, including dental and vision insurance and a cable-TV channel.

Money, which last sized up AARP's products and power in October 1988, decided now was the time to take a fresh look. In the past seven years, AARP's income from financial products and services has soared by more than 60% to $173.6 million. Its mutual fund accounts have doubled to 800,000, even though one of its star funds, AARP Capital Growth, has tanked. What's more, the aging of the population -- with the oldest baby boomers qualifying to sign up next year -- has given AARP the potential to become a financial King Kong. According to American Demographics magazine, for the next 18 years, AARP will gain a prospective new member every eight seconds!

Since the gorilla tag seems rather apt, we rated every one of AARP'S 29 products in 11 categories on a one- to five-banana scale, with five being the best. Our analysis of product quality and price, done with help from more than 20 independent experts, awarded 32è out of a possible 55 bananas. In other words: Overall, AARP's deals are slightly better than average. The range was quite broad, however. We gave our top award of four bananas to AARP's auto club and its annuities, but only one banana to its life insurance.

Before reading our product reviews, you need to understand exactly how AARP works and why it's getting heat now. Despite its tax-exempt mantle, AARP is a moneymaking enterprise. After the $146 million in annual dues, the rest of its revenue comes from AARP businesses and its interest and investment earnings. AARP's products were created in joint ventures with established firms, including Scudder, Prudential, Bank One and Amoco. The partners pay AARP a percentage of sales or fees in exchange for the use of AARP's name.

On top of that, AARP gets the $86 million a year in federal grants to run a handful of government-funded programs benefiting seniors, such as a low-income jobs program. Simpson says this funding creates a seeming conflict of interest. He has charged that AARP lobbies for more federal entitlement spending in part to collect more federal contracts.

AARP executives say all that is nonsense. They note that every dollar of the federal grants ---plus some of AARP's other earnings -- was spent running the programs. AARP defenders add that the outfit is neither the only nor the biggest nonprofit getting federal grants. "What AARP does is neither new nor unusual," says Bob Smucker, vice president of government relations for the Independent Sector, a coalition of nonprofits. "Nonprofits that receive federal money have been lobbying for more than 20 years." Other groups representing the elderly, including the 500,000-member National Council of Senior Citizens and the 7,000-member National Council on the Aging, get an even higher percentage of their revenue from the governmen -- 90% and 93% respectively.

How does a nonprofit like AARP justify its profitable ties to giants like New York Life and Prudential? "Each of the products we endorse provides value or serves a need for our members," says Wayne Haefer, AARP's director of membership. But Simpson and other AARP critics note that since it's classified as a nonprofit, AARP pays taxes on just a fraction of the millions it makes through affiliated ventures.

The IRS and AARP have been fighting over taxes for six years. Like all nonprofits, AARP income that flows from pursuing its mission is not taxed. The group insists its health insurance is a critical member service, so its proceeds should be tax-free. On the other hand, its pharmacy, auto club and other insurance income avoids taxation because tax law exempts royalty income. (AARP concedes that some of its activities are unrelated to its mission. Thus it pays taxes on its Modern Maturity ad revenue and on income from its Scudder funds and Bank One credit cards.) Last year, AARP agreed to pay the IRS $135 million "in lieu of taxes" to resolve an audit over nine years of its tax returns, primarily focused on its health insurance. AARP maintains that the activities at issue should not be taxable but continues to pay $15 million a year in lieu of taxes until the disagreement is settled.

No matter how the tax war ends, AARP is certain to remain a big player in Washington. "AARP is a very powerful group that can bring huge resources to the table," says Henry Pratt, a professor of political science at Wayne State University. And AARP isn't losing power in the financial world either. So before you spend a nickel on any product carrying the AARP brand, take a few minutes to review our evaluations of the deals this mighty gorilla is peddling.

The American Association of Retired Persons, the 800-pound gorilla of senior lobbyists, is under fire for making millions. How good are its deals? We rate all 29 from appealing to appalling.

AARP INSURANCE

ITS MEDIGAP IS EXCELLENT, BUT THE OTHER PLANS MAY NOT BE THE BEST FOR YOU

IF AARP IS AN 800-POUND GORILLA, think of its $146 million mail-order insurance program as the jungle's largest banana tree. Not only is insurance AARP's most popular and profitable benefit, accounting for about 84% of the $173.6 million the group earned on consumer services in '94, it's also one of the group's top membership recruiting tools. "Insurance is second to the information in our magazine and newsletter as the most common reason why new members join AARP," says Wayne Haefer, the director of AARP's membership programs.

AARP lends its name to major insurers like Prudential (for health and long-term-care policies), ITT Hartford (auto and homeowners) and New York Life (life). In exchange, AARP gets a 2% to 3% royalty on all the premiums paid. That's quite a piece of change when you consider that nearly one-fifth of AARP's 32.2 million members buy its health and long-term-care policies, for example, and about 1.7 million members own the casualty coverage. This year, Prudential and AARP may add a dental and vision plan to AARP's menu of mail-order insurance.

AARP plugs its insurance tirelessly and boldly. Mass mailings and ads scream claims like, "No one has more answers to your health insurance needs" and "Safe drivers: Get our lowest rates!" It's also no surprise that executive director Horace Deets plugs AARP's health insurance in his welcoming note to new members. "Some people are more likely to buy AARP's insurance because it carries a name they trust," says Carol Wilson, a fee-only financial planner and AARP member from Salt Lake City.

Should you sign up? Not so fast. With the help of several veteran independent insurance experts, Money rated AARP's 10 types of policies for their coverage and cost. Only its supplemental Medicare insurance got our top score of five bananas. The others ranged from decent to simply dreadful. Here's our assessment of each:

HEALTH [3 1/2 bananas]

TWO POLICIES RATE HIGH AND ONE'S FLAT-OUT LOUSY

Prudential's three health insurance plans are a mixed bag. AARP's Medicare supplemental policy, or Medigap insurance, is one of the best around. Its new hospital-surgical policy, Hospital Advantage, is a decent value for anyone not covered by an employer. But its hospital indemnity plan, which pays a flat amount for each day you're hospitalized, is a flat-out waste of money.

If you're 65 or older, it's smart to buy a Medigap policy to cover some health costs Medicare doesn't pay. There are 10 standard plans, known as A through J, each offering a different degree of coverage. In each case, AARP's Medigap plan is an A+ value for several reasons.

First, AARP's Medigap policies are among the least expensive in most places, says Susan Polniaszek, an independent health insurance consultant who evaluates policies for the United Seniors Health Cooperative in Washington, D.C.For example, a 65-year-old in Arizona would pay $70.50 a month for AARP's Plan C, which covers Medicare's biggest gaps. That's just 60¢ a month more than the cheapest mail-order plan we found in the state. Also, married couples who enroll together in AARP's Medigap plan get a 5% discount. And best of all, AARP charges everyone the same premium regardless of age, making it a great deal for those over 70.

Another plus: Pru provides Medigap coverage to all AARP members regardless of their health if they buy any of plans A through G. The three other Medigap plans -- H, I and J -- include prescription-drug coverage and, like many other insurers, Pru can turn you down based on your health if you apply more than six months after signing up for Medicare Part B, which covers doctor's services and hospital outpatient care.

AARP members between ages 50 and 64 not covered by employer-sponsored health plans ought to consider the AARP/Pru plan that covers part of the cost of hospital stays and surgical treatments. This policy provides a maximum of $500 in daily hospital benefits, plus a specified amount of as much as $7,000 for surgery, depending on the procedure. The plan also pays $50 per doctor's visit, with a limit of three visits a year, and covers half your prescription-drug costs, up to $500 annually. Non-smokers pay $1,620 for the top benefit; smokers pay $1,788. But the coverage is not worth buying after you qualify for Medicare. Then save money by choosing one of AARP's Medigap policies.

No matter how old you are, stay away from AARP's more basic hospital indemnity plan (annual cost: $135 to $324), which it calls supplemental health coverage. This policy pays only hospital bills, and its top benefit -- $120 a day for people 50 to 64 and $69 a day for those age 65 and up -- barely nibbles at hospitals' $900 average daily cost.

LIFE [1 banana]

YOU COULD PAY AN AWFUL LOT FOR SOME PUNY BENEFITS

If you need life insurance, ignore the 10-month-old program from AARP and New York Life. The top death benefit is a measly $13,800 to $25,000, depending on your age and on the policy. Premiums are pricey too. "Insurance that comes in small amounts is expensive, no matter who sells it," says Peter Katt, a life insurance adviser in West Bloomfield, Mich.

AARP sells five New York Life policies: Two are whole life, two are term and the fifth starts as a term policy and converts to whole life at age 65. The insurance is especially exorbitant for women and healthy men. Most life insurers charge women less than men of the same age because women live longer on average; similarly, most offer discounts to healthy people. AARP, however, costs the same for all people of the same age.

For example, a 55-year-old pays about $285 annually for AARP's $15,000 fixed-benefit term insurance. After five years, the premiums rise to $407 a year. But for roughly $300 a year, a 55-year-old woman could buy $50,000 in term coverage for 20 years from companies such as Lincoln Benefit Life or Federal Kemper, says Milton Brown, president of Insurance Information Inc., an independent policy shopping service (800-472-5800).

HOMEOWNERS AND AUTO [3 bananas]

AARP's fine for your home, though not for your car AARP's homeowners insurance can be a superb deal, but steer clear of its auto insurance if you're over 65. To see how AARP's policies stack up against others, we got rate quotes for hypothetical couples living in Phoenix; Stamford, Conn.; and Troy, Mich., a Detroit suburb. We compared AARP's policies -- written by ITT Hartford -- with two big national insurers, Allstate and State Farm, and with Geico, well known for its low rates.

AARP's homeowners coverage was less expensive than Allstate and State Farm in each of the three cities. In our test, we assumed the couple had a 1940 wood-frame house with smoke detectors and deadbolt locks and wanted $175,000 in replacement-cost coverage, $300,000 in liability coverage and a $250 annual deductible. ITT Hartford charged the Stamford couple, for example, just $498 a year vs. State Farm's $582 and Allstate's $633. (When comparing AARP's mobile-home insurance in Arizona and Michigan, we found its Foremost Insurance policy beat the others too.)

ITT Hartford's auto insurance for AARP members flunked a similar test. We got rates for three couples-a woman age 55 and her 57-year-old spouse, and two other couples, ages 65 and 75. Each couple owned '91 and '93 Buick Regals and had clean driving records. Their coverage: bodily injury protection of $300,000; $100,000 protection per person per accident; property liability coverage of $50,000 and uninsured motorist coverage of $20,000 per person or $40,000 per accident. We added $10,000 medical payment coverage in Phoenix and Stamford; Michigan is a no-fault state. The deductibles were $200 or $250 for comprehensive and $500 for collision.

State Farm offered the lowest premiums for the 65- and 75-year-olds, and Geico was the best choice for the 55- and 57-year-olds in Phoenix and Stamford. AARP came in cheapest only for the Troy couple in their fifties and was the most expensive for two of our 75-year-old couples. In Phoenix, for instance, ITT Hartford charged $3,194 for the 75-year-old drivers, more than double State Farm's $1,564.

AARP's auto insurance, however, has a few features that may be worth a few extra bucks to you. For instance, it guarantees policyholder rates for a full year, while many insurers typically change rates every six months.

LONG-TERM [2 bananas]

CARE WHY YOU SHOULD PASS UP THIS SUBPAR COVERAGE

Long-term-care insurance is generally not worth buying unless you have a family history of illness during old age and either don't have enough savings to pay for a nursing-home stay or aren't likely to qualify for Medicaid. If you could benefit from a policy, skip AARP's offering. Prudential's long-term-care insurance for AARP members costs more and covers less than plans available from other insurers, including CNA and Travelers.

AARP pays as much as only $100 of daily nursing-home costs and a maximum of just $50 for daily home health-aide expenses. Average annual premium: $786. To get these benefits, you must meet strict rules. For example, AARP won't pay for a nursing home unless a doctor certifies that you have a medical condition or an illness. Other insurers provide benefits if their policyholders are simply too frail to care for themselves.

Also, AARP doesn't cover care for Alzheimer's sufferers unless they can't handle simple tasks on their own. "Somebody with Alzheimer's may be able to dress and bathe himself, but he still needs long-term care," says health insurance expert Susan Polniaszek.

AARP doesn't offer riders that may be valuable to some people either. For example, policyholders who opt for the maximum $100 daily benefit cannot buy automatic inflation protection that increases a policy's daily benefit every year to keep pace with higher nursing-home costs, which are rising about 5% to 7% a year. Instead, AARP's customers can boost their coverage only once every four years and the added benefit gets tacked onto the premiums. For example, a 65-year-old taking the $100 daily benefit pays $1,356 a year for the first four years. If he increases the benefits by, say, 20% after each four-year period, the annual premiums will hit $2,668 by the time he reaches 73.

Other issuers let you buy comparable coverage that features annual inflation protection from the start. With CNA, that 65-year-old pays a fixed annual premium of $1,427, which is less than AARP's $1,826 after the first four years.

Prudential officials say they may have a long-term-care plan next year with lower premiums. We'll keep you posted.

AARP INVESTMENTS

PLAYING IT SAFE CAN MEAN SETTLING FOR SO-SO RETURNS ON ITS FUNDS AND ANNUITIES

WITH MORE THAN 6,000 MUTUAL funds on the market, plus over 600 companies selling fixed-rate annuities, it's hard for AARP to stand out. Indeed, while the group has a few fine funds, most of its investments aren't world beaters. The choice of investments is a bit skimpy too. While AARP sells six plain-vanilla stock and bond funds and two money funds, you won't find a small-company stock fund, an international fund or an intermediate- or short-term bond fund.

However, AARP offers sensible guidance and useful educational materials for its investors. Those are key pluses for AARP's clientele, who often lack investing experience. In many cases, the average AARP fund owner holds no other mutual funds. So investors in AARP's eight no-load funds, all run by Scudder Stevens & Clark (manager of the Scudder funds), and its new fixed-rate annuity sponsored by American Maturity Life may appreciate the soft sell and high degree of hand-holding.

AARP's fund business is becoming increasingly lucrative. In 1988, AARP earned $1.4 million in fees on its then seven funds. Today, its eight funds send the AARP cash registers ringing to the tune of $7.6 million a year. The fee income is funneled through a taxable, for-profit subsidiary, AARP Financial Services, which last year paid the IRS $5.8 million in taxes.

MUTUAL FUNDS[three bananas]

STICK TO PROVEN WINNERS IN AARP'S FUND FAMILY

AARP and Scudder go to great lengths to point out that their eight stock, bond and money-market funds aren't designed to be top performers in their categories. Instead, investors are told in brochures and prospectuses that each product is tailored to offer a risk-averse clientele stable share prices, high income and competitive performance. "Rather than seeking the highest return," says Howard Schneider, vice president of the AARP Investment Program, "we want a balance between risk and return." On those counts, the funds have a mixed record. While AARP's two most popular funds, AARP GNMA & U.S. Treasury ($5 billion in assets) and AARP Growth & Income ($2.5 billion), have served investors quite well, as has the newer year-old Balanced Stock & Bond, five of the eight others have missed the mark on both a risk and return basis.

To its credit, the fund family was designed with AARP's older, less affluent investors in mind. The 800-number operators at Scudder are taught to be sensitive to the needs of older clients; for example, they get training on matters such as IRA distributions. Plus, the low $500 minimum investment on all the funds except High-Quality Tax-Free Money Fund's $2,500 makes the funds widely accessible. Here is how Money rates the AARP funds, listed in descending order of asset size:

-- AARP GNMA & U.S. TREASURY. Investors who bought this fund looking for high current income and below-average risk must be pleased. Over the past five years the fund has delivered a 7.7% average annual return with only modest price swings. Lead manager David Glen favors holding Ginnie Maes for their slightly higher yield and uses short-term government bonds to dampen volatility.

-- AARP GROWTH & INCOME. This fund, which specializes in high-yielding shares of medium to large companies (median market capitalization: $4.8 billion), is a long-term standout. Over the past five years, the fund has returned 13.3% on average, vs. the 10.2% return for the typical growth and income fund, while taking on less risk than its peers.

-- AARP INSURED TAX-FREE GENERAL BOND. Over the past 10 years this fund has underperformed the typical municipal bond fund yet been almost 25% riskier. In order to dampen the volatility, Scudder recently altered the fund's strategy by letting it hold uninsured bonds and shortening the average maturity of the portfolio.

-- AARP CAPITAL GROWTH. This aggressive stock fund, once AARP's top performer, has been a dud over the past five years. So last November, Scudder revamped the management team, stopped relying on just a few sectors such as technology and communications, and began focusing on mid-size to large blue chips. For now, experts think investors ought to stay on the sidelines. "The fund isn't very attractive for conservative AARP members," says Morningstar fund analyst Mark Wright, "but it may make more sense once you know more about what the team is doing."

-- AARP HIGH-QUALITY BOND. This corporate bond fund, designed to provide slightly higher income than AARP's government fund, sticks to rigid credit safety requirements: 65% of the portfolio must be in triple-A- or double-A-rated bonds. But that hasn't ensured a smooth ride. Over the past five years, the fund has been 30% more volatile than the average high-quality corporate bond fund. As with AARP's muni fund, the managers have been adding more medium-term bonds to lower risks.

-- AARP HIGH-QUALITY MONEY FUND and AARP HIGH-QUALITY TAX-FREE MONEY FUND. Below-average yields make these two money-market funds poor choices. For instance, the recent 5.18% yield on the taxable fund was far below the 5.45% average for similar conservative funds.

-- AARP BALANCED STOCK & BOND. This year-old fund is off to a great start. It has returned 12.3%, compared with 11.6% for the average balanced fund. A plus: The stock portion is managed by the same team that runs AARP's winning Growth & Income Fund.

ANNUITIES [four bananas]

YOU GET NO GIMMICKS PLUS FAIRLY GOOD YIELDS

First the good news: The fixed-rate annuities that AARP unveiled in February are relatively gimmick-free and easy to understand. But the short-term rates on these annuities, which are tax-deferred, interest-bearing investments issued by life insurance companies, were recently at the low end of the 5% to 7% range available elsewhere.

As with all fixed-rate annuities, AARP's can pay out its income to you free of any tax penalties once you turn age 59è, after accumulating the interest tax deferred. AARP's version, now available in 38 states, is sponsored by American Maturity Life, a joint venture formed by life insurance companies ITT Hartford and Pacific Mutual to sell AARP annuities. As you would hope, since AARP's annuities are geared for conservative investors, American Maturity maintains strong financial-safety ratings: A+ from A.M. Best and AA+ from Standard & Poor's.

AARP offers two types of fixed annuities. The single-premium deferred annuity lets you lock in today's yield for three to 10 years; that's attractive if you believe interest rates are likely to fall or if you just like knowing exactly what you will earn each year. The rates recently ranged from 5.0% for the three-year annuity to 5.6% for the 10-year contract. However, if you think rates are headed higher, you can choose from two flexible-rate versions whose rates, recently 4.8% and 4.9%, are pegged to five-year and 10-year Treasury bonds and adjusted annually. Those yields are about two percentage points less than you can get from other annuity sponsors, however. That's because AARP's annuities are invested in ultraconservative bonds and have features, such as a guaranteed return of principal, whose added costs reduce returns. "Our interest rates are competitive but not necessarily the highest," explains Laura Rossman, the director of AARP's annuity program.

AARP gets points, though, for its soft sell, which is as welcome as it is uncharacteristic in the annuity business. For instance, you won't see initial teaser rates of up to four percentage points that then proceed to plummet after the first year. Also, instead of selling the annuities through brokers or insurance agents, AARP solicits customers with mailings and Modern Maturity ads, referring them to an 800 number staffed by low-key reps who work on salary, not sales commissions. It's fair to add, however, that competitors USAA (800-531-2920) and the Wholesale Insurance Network (800-808-5810) also sell top-rated, commission-free annuities.

COMPUTER SERVICE [3 bananas]

THE CHATS CAN GET HEATED, BUT THE INFO CAN BE OLD

Yes, even AARP is on the information superhighway. America Online, CompuServe and Prodigy now offer the AARP Online site on their computer services to their 7.9 million subscribers. AARP members get slight subscription discounts on AOL and Prodigy-$8.95 a month instead of the standard $9.95 rate; they don't receive any special deals from CompuServe. Tap into AARP Online and you can voice an opinion about topics such as Social Security and age discrimination, retrieve health and financial information and keep up with AARP's political stands. Much of the advice is straight out of AARP Bulletin and Modern Maturity, though.

AARP isn't the only senior resource in cyberspace. Another excellent service is SeniorNet (800-747-6848), on America Online and the Internet, which also offers computer classes, a newsletter and software discounts if you join the nonprofit for $35.

AARP Online's message boards and so-called chat rooms can be provocative. The most popular topic currently is entitlements; lately exchanges about the future of Social Security and Medicare have been getting heated. AARP officials sign on regularly to answer questions about AARP's products and politics, but if a recent America Online session with executive director Horace Deets is any indication, this feature hasn't caught fire. For much of the hour, only a dozen or so users were in the room, including at least three AARP staffers and a lurking Money reporter.

AARP SERVICES

TRAVEL DISCOUNTS [3 bananas]

AARP OFFERS BARGAINS GALORE, BUT YOU CAN DO EVEN BETTER

There's nothing wrong with AARP's automatic travel discounts. They range from 10% to 50% at more than 25 hotel chains including Holiday Inn and Marriott, 5% to 30% on car rentals with Avis, Hertz and National, and 15% for Gray Line bus tours across the country. In fact, thanks to AARP's so-called Purchase Privilege Program, members can recoup their $8 annual membership fee several times over during one vacation.

Not bad. But you can often do better. These days it's easy to find similar or more generous deals offered by hotels, rental car firms and airlines to all senior citizens, AARP member or not. (But AARP's deals are fetching for people 50 to 60 who may not yet qualify for other senior discounts, though.) Also, in the past few years, AARP has removed a few platters from its smorgasbord of travel deals. The group has quit offering discounts on American Airlines flights and 14 cruise lines and just junked customized cruises and package tours offered through American Express.

Almost all hotel chains now give seniors 10% off room prices if they simply ask, according to Gene Malott, editor of the newsletter the Mature Traveler ($29.95 a year; P.O. Box 50400, Reno, Nev. 89513). "This is such an industry standard that seniors should avoid any hotels that don't give it," says Malott. Several major hotel chains have even bigger bargains. Anyone over 60 can get as much as 50% off rates at Hilton hotels by paying a $50 annual fee to join the chain's Senior HHonors program. Choice, the parent of hotel chains such as Econolodge and Comfort, cuts room rates by as much as 30% for any traveler over 50 making reservations in advance at one of its 3,300 hotels. But as with AARP hotel discounts, many other senior programs limit room availability.

While AARP's car rental discounts with Avis, Hertz and National are attractive, check out Thrifty too, which promises any 55-plus traveler 10% off the company's best rate.

For travelers of any age, the American Automobile Association (AAA) offers its members discounts of as much as 30% at 11 hotel chains, plus 10% to 20% discounts at theme parks, for Hertz car rentals and at more than 1,100 U.S. restaurants. Annual dues for AAA: $28 to $70, depending on where you live.

Although AARP has canceled its customized tours, plenty of firms still offer trips designed especially for seniors, such as SAGA Holidays (800-343-0273), ElderTreks (800-741-7956) and Grand Circle Travel (800-248-3737), launched in 1958 and now the largest tour operator for retired Americans.

AUTO CLUB [four bananas]

AARP'S AUTO PLAN IS WORTH THE PRICE, THOUGH IT'S NOT TOPS

For $39.95 a year, the basic AARP Motoring Plan from Amoco Motor Club is a solid value. However, it is not the best available. That distinction goes to $28-to-$70 American Automobile Association (AAA), rated the best of the eight major car clubs by Money last August. AARP's basic plan gives you emergency roadside assistance at no cost when you use an authorized service, maps for trips and a host of other perks. Best of all, AARP members get $10 off the annual fee Amoco charges any other driver. But AARP offers free towing from only about 6,000 Amoco dealers, fewer than half the 13,322 of AAA (800-222-4357). Here's how AARP compares with the competition:

SERVICES

ROADSIDE SERVICE WHAT YOU GET Free tire changes, emergency gas delivery and jump starts for a dead battery

HOW IT STACKS UP -- Roadside service is standard from all major auto clubs. The best plans, including AARP's, contract with repair shops who dispatch trucks for free instead of just reimbursing you for hiring a truck yourself.

TOWING AND REPAIRS

WHAT YOU GET Free towing to any authorized Amoco station or any shop of your choice within a five-mile radius of the breakdown. If you use your own tow service, the plan reimburses as much as $50.

HOW IT STACKS UP -- Far fewer dealers are available for free towing than with AAA. The $50 reimbursement cap is merely average.

TRIP INTERRUPTION INSURANCE

WHAT YOU GET Plan covers as much as $500 per couple in hotel, food and car rental expenses if you're in an accident more than 100 miles from home.

HOW IT STACKS UP -- AARP members must choose the $59.95-a-year plan to get reimbursed for expenses if their car is disabled. Montgomery Ward (800-621-5151) is the only big club to include this coverage in its standard plan.

LOST KEY/LOCKOUT PROTECTION

WHAT YOU GET The plan pays up to $50 toward the cost of a locksmith if you lose your keys or lock them in your car.

HOW IT STACKS UP -- AARP pays only to get you into your car. A few plans, such as Montgomery Ward, cover the loss of house keys as well.

ADDITIONAL COVERAGE

WHAT YOU GET Membership includes spouse or any other adult living with you.

HOW IT STACKS UP -- Most plans include spouses for free.

OTHER FEATURES

WHAT YOU GET Covers as much as $250 in hospital emergency-room costs when you're more than 100 miles from home. Plan also reimburses as much as $1,000 in legal costs for minor traffic offenses.

HOW IT STACKS UP -- AARP's hospital deal is unusual and attractive. But many plans pay toward an ambulance, and AARP's doesn't. Most clubs help defray legal fees.

MAIL-ORDER PHARMACY [three bananas]

YOU CAN OFTEN PAY LESS AT OTHER MAIL-ORDER FIRMS

AARP Pharmacy Service, the nation's second largest nonprofit mail-order drugstore with 2.5 million customers (netting AARP $4.3 million in annual royalties), charges less than the average retail store on most prescription and over-the-counter drugs. But hold on. With a little shopping at other mail-order firms, you can often beat AARP's prices. What's more, if you take medication regularly, you can get a steal through a mail-order discount plan for people in the National Council of Senior Citizens, a 5-million member AARP rival that's open to anyone of any age.

Money compared AARP Pharmacy's prices on a sampling of 15 commonly used brand-name and four generic medications against those of the average chain store and two other mail-order firms available to the general public (see the table at left). AARP Pharmacy, which sells to the public as well as to AARP members, charged about 18% less than the average chain store-or $1,774.95 vs. $2,166.91-as well as 2% below Action Mail-Order (800-452-1976; shipping fee: 75¢), the next cheapest mail-order firm. However, we found that more than eight times out of 10, AARP's prices were not the lowest we saw. For example, AARP demands more than twice as much for Diltiazem, a generic used to treat angina, than Medi-Mail does (800-331-1458; free shipping for prescription drugs). The price: $48.75 for 100 tablets vs. $19.95.

The best buys of all that we encountered were generics from the Health Care Services mail-order pharmacy, assuming you join the National Council of Senior Citizens (800-333-7212). After paying the $12 annual NCSC membership fee and $52 a year for the pharmacy, you can get as much as a 60-day supply of any generic-brand drug for just $10. NCSC members also qualify for discounts of about 16% to 55% on brand-name drugs.

One more point: Most mail-order firms take about 10 days to two weeks to deliver; the wait is five days, on average, with AARP. If you need your prescription filled quickly, AARP charges $13.95 for next-day deliveries. To beat that costly trap, ask your doctor to write you two prescriptions-one for a two-week supply of your medication to be filled at a local discount drugstore, the other for the remainder to be filled by AARP or another mail-order service.

CREDIT CARDS [three bananas]

Turn to AARP only if you lack a credit history With thousands of credit-card issuers scrambling to secure a spot in your wallet, most AARP members should have no trouble getting a card that matches or beats the AARP offerings (800-283-3310). The exception may be people over 50 who have been turned down by other issuers because of deficient credit histories; they will find AARP's cards relatively easy to get.

AARP and its credit-card partner, Bank One in Columbus, Ohio, give members three choices: Visa Classic (15.9% variable interest rate; $10 annual fee; $5,000 credit line); Visa Gold (15.9%; $15 fee; $7,500 credit line); MasterCard Classic (17.9%; no annual fee; $5,000 credit line).

If you are among the one in three people who pays his or her credit-card balance in full each month, you shouldn't care much about a card's interest rate. But you would be a candidate for a card carrying no annual fee. While AARP's no-fee MasterCard is a decent one, you can do better. In Your Money Monitor, on page 44, you will find seven no-fee cards with much lower rates than AARP's 17.9%. If you consider low rates vital, you'll want the lowest around. Seven cards with rates below 10.5% appear in Monitor too.

Bank One's cards do have one appealing feature, however. Unlike most card issuers, Bank One counts assets such as savings and home equity when judging AARP card applicants who don't qualify for its regular cards because of low incomes or deficient credit records. To be considered, you must have total assets of more than $80,000. And that's giving credit where credit is due.