Puerto Rico is drowning in debt—$70 billion worth—but it wouldbe wrong to think that only those in Puerto Rico would be affectedby some of the measures being suggested to manage thesituation.

Bondholders, both in Puerto Rico and in the rest of theU.S. as well, will be in for a toughtime if some of the strategies suggested are used—and that willweigh on both plan participants and retirees, since theirretirement accounts may be laced with Puerto Rican bonds.

In addition, retirees in Puerto Rico, and participants in theisland’s public employee pension plans, could be left out inthe cold, since those plans are coasting on empty—to the tune of$46 billion in unfunded liability.

Plenty of bonds were sold, but the Puerto Rico government failedto make contributions to fund its pension plans. The governor, AlejandroGarcia Padilla, has opposed cutting pensions as a way to helpreduce the island’s debt, calling it unconstitutional. But therearen’t a whole lot of alternatives—and none of them are verypalatable.

According to Bloomberg, “The island’s plight affects most peoplewith a mutual fund invested in the municipal bond market” becausePuerto Rico’s bonds are exempt from taxes at every level ofgovernment throughout the U.S. “As a result, they are held by abouthalf of open-end muni funds,” which means lots of retirees outsidePuerto Rico are holding them, whether they know it or not.

Congress is currently considering a range of options that rangefrom bailout to bankruptcy (the island is not eligible to declarebankruptcy without legislation to allow it) to bond haircuts forinvestors, as well as possibly handing over control of PuertoRico’s economy to a federal oversight board and restructuring itsdebt load. The island is in a tough spot, with an economy that hasbeen contracting for years, a shrinking population and a growingpoverty rate.

Many U.S. pension and retirement funds will be left holding thebag if Puerto Rico defaults (a massive payment is due May 1) or ifbondholders are made to take a haircut. The fallout will spread farbeyond the island, and can only add to the woes of people alreadystruggling to save enough to be able to retire.