Yes! Some city or state is going to go bankrupt because of this, and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. Various governments will try to implement various forms of austerity to make it work, and former employees are just going to have to suck it up.

Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft.

Of course, the latest date I've seen (2038) is almost exactly when I should have been eligible to start drawing on it.

Well, let's just say that somehow what you are saying is correct. How comfortable would you be investing in a long-term muni bond after that? If you were a contractor, how would you feel about working on a long-term project for a state or local government? Who would want to work for the government when there is no way to trust that any of the benefits will materialized (other than the salary; then again, who knows?)

It's not just former employees that will suffer. Everyone suffers when states have to pay higher interest rates on their bonds because of poor credit ratings (that's what bankruptcy does to a state) or have to pay more for workers and contractors. Everyone will have to pay higher taxes and everyone will receive less from the government.

I cannot understand the logic of not making good on government obligations. You can take the position that the government should stop promising pensions, but how can anyone think it is a good idea for the government to fail to pay for the pensions it already promised people (or, frankly, any other promise the government made)?

This is exactly why people have been screaming about this problem for a couple of decades.

It is going to be HUGE and do incredible damage. Retirees will be hurt catastrophically, costs of government borrowing will skyrocket, programs will be cut massively, workers will abandon government.

The issue is that the costs of meeting the prior obligations will be completely impossible. States, cities, and school districts will go bankrupt, massive numbers of people will be fired, and taxes will go up while service goes down.

Unfortunately the politics prevent a fix today and prevented a fix 10 or 20 years ago when it would have been much cheaper. The fix will happen in 10 to 20 years and it's going to be horrific.

Happened in the private sector. Most millennials don't trust pensions and prefer 401k. As you are in control of the money and there isn't much that could be changed unfavorably in 50 years.

I am not sure millennials don't trust pensions; I think we never had the choice. It is also wrong to assume you are in control of your 401k, since for most people a 401k will be invested in mutual funds managed by the same businesses that manage pension funds. Some of those funds have absurd expense ratios that erode retirement savings.

A government changing its mind about pensions could easily change its mind about the favorable tax treatment of 401ks. Or go even further and follow HN's exhortations to implement a wealth tax. Upper-middle-class retirement funds are a huge component of inequality; reducing that can only be good, right?

You pay tax when withdrawing funds from 401k. Worst case they'll remove the 401k and force everyone to migrate to a Roth IRA. Which is the same as the status quo...aka not that bad.

As for Roth IRA. I don't trust the government to honor their end of the deal. I can see them taxing withdrawals for the top 10% in the future.

> Some city or state is going to go bankrupt because of this,

States cannot go bankrupt, without a change to federal law. Cities can and have, and pensions have already been addressed in that context. It's not a new question.

> and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would.

It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question.

> Various governments will try to implement various forms of austerity to make it work,

They already are to prevent running into the major crises (e.g., recent pension funding requirements reforms in California.)

> Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft.

Social Security won't crash; even with scenarios projecting Trust Fund exhaustion it still ends up paying at worst something like 2/3 of eligible benefits out or current revenues out to the limit of projections.

> It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question.

Minor nitpick, but it’s in Illinois’ state constitution that pensions cannot be reduced. Republicans want to change the constitution to remove this rule, but Illinois is an overwhelmingly Democratic state so that’s never going to happen. It will be interesting to see how all of this plays out.

> Minor nitpick, but it’s in Illinois’ state constitution that pensions cannot be reduced.

Major nitpick, but in the event of municipal bankruptcy (the context of the store you responded too), federal bankruptcy law trumps state law—including the state constitution—because Supremacy Clause. The bankrupt entity doesn't cut pensions, the bankruptcy court does.

A major problem is that this is a case of I'll be gone, you'll be gone.

The union leaders and the politicians - typically in their 50 to 70s - who made the promises will be dead by the time the 25 year old new hires try to collect their pensions at 55 or 65. The incentives are all sorts of screwed up and it's very difficult to create a healthy set of constraints for this kind of bargaining.

> ... create a healthy set of constraints for this kind of bargaining.

They should simply put the burden of new obligations (debt or pension guarantees) on individuals rather than on the city. If you live in a municipality when they take on a bond for a stadium, or agree to pension payments, then you pay those debts regardless of where you have moved to. Or put the obligations on property, so people have an interest in not burdening themselves or their investments.