Here's the essential shape of 401(k) as a backbone of the retirement system:
— Poor people get absolutely nothing.— Wealthy people who would have had large savings anyway get a nice tax cut that offers no meaningful incentive effect.— For people in the middle, the quantity of subsidy you receive is linked to the marginal tax rate you pay—in other words, it's inverse to need.— A small minority of middle-class people manage to file the paperwork to save an adequate amount and then select a prudent low-fee, broadly diversified fund as their savings vehicle.— Most middle-class savers end up either undersaving, overtrading, investing in excessively high-fee vehicles or some combination of the three.
— A small number of highly compensated folks now have lucrative careers offering bad investment products to a middle-class mass market based on their ability to swindle people.
Another problem he is spot on about is that the dominant business strategy for companies marketing 40lk products is to market inferior products because it is possible to make more money on them. There is so little money to be made on better products that it doesn't make any sense to market them; when this is the case market mechanisms can't work to create good outcomes.
This situation isn't confined to 401ks either. Many goods are set up so that dominant business strategies are often terrible for the consumer (one example, health care and the dominant strategy of not publishing prices). In cases like these market incentives can't lead to good outcomes, the mechanisms just don't work.
To briefly broaden the focus, I think this is a general problem with the insistence on the merits of exposing individuals to risk. Basic economic thinking implies that we should all be sorting towards are individual comparative advantages, setting up institutions that mean particular skills heavily influence outcomes, like financial management, are terribly inefficient. Most people will reach a point where they are no longer capable of working, why should the outcome of their life after this point depend so strongly on financial skills they may or may not possess any talent for? Why do we create institutions that drive this result and advantage those with these skills rather than simply creating an even playing field that those skilled could enjoy additional advantages but everyone would be comfortable. It wouldn't be a problem if the financially savvy could use their skills to retire a year or two earlier, we should all enjoy the fruits of our talent and labor, but it is a problem that those that work hard but suck at finance have a poor retirement while those that are skilled in this area might be able to retire 10 years early due to all the subsidies they enjoy. What good does this do the country?