A protester stands near the courthouse for the sentencing hearing for Bernard Madoff in New York, June 29, 2009. Photo by Gu Xinrong/XinHua/Xinhua Press/Corbis.

Bernard L. Madoff was sentenced Monday to 150 years in prison, bringing some closure to one of the largest investor frauds ever.

But thousands of people, including many retirees, who invested with the 71-year-old Madoff are facing their own sort of punishment for years to come.

Jack Cutter, 80, a retired petroleum engineer in Longmont, Colo., has started working at the meat counter at a Safeway supermarket to help make ends meet.

Judy and Don Rafferty of New Milford, Conn., have parked their RV, unable to afford the insurance, much less the cost of vacations to Florida and other parts of the country.

Allan Goldstein and his wife, Ruth, are getting some quality time with their grandchildren. But that’s only because they were forced to sell their dream house in upstate New York and move in with their daughter in southern California.

“My whole life is upside down,” says, Goldstein, 76, “and that’s the way it’s going to be until I die.”

The Madoff debacle, which federal prosecutors say cost investors as much as $65 billion, has huge consequences for the lives of those who invested with him.

Retirement plans have been wiped out along with double-digit investment gains. Many are faced with selling their homes in a glutted market or reentering the workforce in low-paying jobs. Trust funds established to take care of elderly parents or to bankroll college for the grandkids have been eviscerated.

Even for those not wiped out, there are difficult adjustments and side effects. A retired Colorado doctor said in a letter to the Senate Finance Committee that he had to curtail volunteer medical missions to Afghanistan and other countries because of his need to rejoin the regular workforce.

He was greatly saddened, he wrote, that he could no longer “help provide quality care in Third World countries” or exhibit “a positive, caring representation of America.”

Law offers limited protection

The investors are also learning a painful lesson in how little protection the law affords victims of investment fraud.

Some have filed lawsuits against the Securities and Exchange Commission for failing to unearth the two-decade-long Ponzi scheme that Madoff operated. Others are pressing a bailout-weary Congress for special legislative relief to help cover their losses.

Under federal law, investors can recoup up to $500,000 each from the industry-funded Securities Investment Protection Corp. (SIPC), which was established by Congress in 1970 to cushion the impact of brokerage failures. The administrators of that fund, along with a federal bankruptcy trustee in Manhattan, have been charged with cleaning up the Madoff mess.

On July 1, the trustee announced that the SIPC had committed $231 million for the 543 claims by Madoff customers under consideration. But that money would cover losses only up to the $500,000 statutory limit, the trustee said, leaving an additional $2.74 billion in claimed losses above the limit. He said the only source of funds to repay those losses was the possible recovery of assets belonging to Madoff’s company.

Additionally, many investors in the Madoff case are finding that they do not qualify for relief under the law. Cutter, for example, dealt with a Boulder-based money manager who made the decision to sink some of his retirement savings into the Madoff funds. He said he has been told that he is not entitled to recover anything because he dealt with a middleman rather than with Madoff directly.

Downsizing lifestyles

As a result, Cutter says he’s facing losses of about $1 million, as well as a major lifestyle change, such as the Safeway job, where he earns $8.64 an hour (including a recent raise of 25 cents an hour).

Gone as well are trips he and his wife, Melba, used to take to such destinations as Africa and China. “That is not going to happen again,” he says.

The investors also contend that the breadth of their losses is being unduly minimized. Many say they built their lives around the investment statements they received from Madoff, and even paid taxes on those gains, even though they proved to be wildly inflated in hindsight.

But they say officials have adopted a much narrower view, and are limiting the losses they might recover to the difference between what they originally invested with Madoff and any money they took out of his funds.

Goldstein, who owned a textile company, puts his losses at about $4 million but says under the formula the government is using he has been told he may recover no more than $320,000.

Based on the statements from Madoff, he and his wife built a dream house in New York near the Berkshires, joined a local golf club and lived off the proceeds of a Madoff-managed IRA. Now, Goldstein says he has applied for food stamps, and his wife has begun seeing a psychiatrist “because of emotional problems this disaster has caused in our lives.”

Some observers have said the investors should have been more suspicious in how they viewed the steady returns that Madoff offered in good times and bad over so many years.

Ron Stein, a New York financial planner, said he was skeptical after he got married and found out that many of his in-laws had invested heavily with Madoff. Stein recalls being a naysayer at early Thanksgiving dinners.

“Initially, I said, ‘Come on!’ ” Stein said. Later his concerns were allayed because Madoff did not bear some of the traditional signs of a scam artist. His operations had been scrubbed over the years by regulators, and he was once a top executive with the NASDAQ stock exchange. Still, Stein never invested with Madoff.

Stein now operates a website and support group for Madoff investors, many of whom are retired.

A blow to the ego

“For a lot of the older men, their sense of ego and self-worth was tied up in the value of these investments,” Stein said. “It gave them a certain feeling of empowerment. I see the emotional devastation of this being incredibly pervasive.”

Many are physically as well as emotionally unprepared to pursue the money they might still be entitled to. Some of the retirees, Stein said, are in danger of missing the July 2 deadline for filings claims for losses with the securities protection group.

Many investors say they were drawn to the scam by relationships with people they had long trusted. For some, investing with Madoff became a family affair that spanned generations, and now has produced a series of cascading woes.

Rafferty said her mother-in-law, 91, had all of her retirement savings with Madoff. She has had to give up her apartment and move in with a relative—who also invested with Madoff and has suffered losses. “Now we have been robbed of our retirement,” she says.

Richard Friedman, a Long Island accountant whose family also invested heavily with Madoff, said he is especially concerned about his mother, 83, who has Alzheimer’s disease and requires 24-hour care.

His father, who had invested with Madoff for years, passed away two years ago before the scandal was exposed. “He died thinking he left her totally protected, and well taken care of,” Friedman says. Now, they are not so sure.

Rick Schmitt, a journalist for more than 25 years, has written for the Los Angeles Times and the Wall Street Journal. He lives in Maryland.