GM retirees tried to play it safe

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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 very, very 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 risks to haul in lots of money, the bond market tends to attract people who want to preserve 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 manufacturing 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.

What follows is the last part of a four-part series, focusing on some GM bondholders who are finding retirement to be a lot less cozy than they had ever imagined.

John Linville

Family: Wife, grown children, grandchildren, mother

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