Re­tirees tried to play it safe

The Washington Times Weekly - - Politics - BY JOHN P. KRUDY

Gen­eral Motors Corp.’s trou­bles have de­railed the re­tire­ment plans of many Amer­i­cans, es­pe­cially in­vestors in the au­tomaker’s once-prized bonds.

Bobby Work, 87, bought GM bonds with her hus­band 30 years ago and dearly misses the $20,000 they once yielded each year. Teresa Durhone, 50, put the profit from the sale of her house into the bonds so she could quit work and care for her sick mother. Now she’ll need to find work again. The list goes on. Af­ter GM’s bank­ruptcy fil­ing on June 1, th­ese and many other bond­hold­ers were forced to cut back on their ex­penses and find other ways to pay their bills. They hadn’t plan to do that in re­tire­ment, but the largest in­dus­trial bank­ruptcy in U.S. his­tory got in the way.

“I’m ver y, ver y dis­tressed,” Ms. Durhone said. “It’s as if the law has changed.”

Bond­hold­ers thought their re­tire­ment dreams were safe. Af­ter all, they had bought bonds, not stocks.

While the stock mar­ket is where many in­vestors take r isks to haul in lots of money, the bond mar­ket tends to at­tract peo­ple who want to preser ve their wealth. Bond­hold­ers get their money back along with pe­ri­odic in­ter­est pay­ments (the yield) — or at least they’re sup­posed to.

While they gen­er­ally don’t reap dou­ble-digit gains as some stock­hold­ers do, bond­hold­ers can ex­pect a steady stream of in­come from the in­ter­est pay­ments as well as a lump sum of money when their bonds ma­ture.

Re­tirees bought GM bonds think­ing that pat­tern would be un­bro­ken.

John Linville, 64, spent his ca­reer as a pi­lot af­ter work­ing for a year on a GM as­sem­bly line. Thanks to his early mem­o­ries of GM’s man­u­fac­tur ing might, he in­vested in the com­pany think­ing it would never fail.

“I felt that they were the bedrock of our econ­omy. They were a For­tune 500 com­pany,” Mr. Linville said. “I fig­ured there was no way that GM would leave our econ­omy be­hind in the dust.”

Other re­tirees shared Mr. Linville’s faith in GM. In­stead, they lost in­vest­ments that had been in­tended to fund chil­dren’s ed­u­ca­tions, med­i­cal ex­penses and, es­pe­cially, their re­tire­ments.

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