I was told by a wise old engineer to pay myself first. From that point until a few years ago I was putting 15% of my income into a 401(k). With company match I am still close to 15%. I have saved a considerable amount in that account (and the subsequent IRA after the change of job roll over).
At least for me the 401(k) represents a method of savings outside of the tax code (which means I don't have to worry about the complexities of the code in my savings). I think this is an incentive for everyone to use this device. In addition you still pay taxes on the money when it is withdrawn. From a financial perspective it probably would have made more sense to pay taxes on the money when I earned it, but now I have options to retire at 59 1/2 on the account and draw it down until my Social Security and pension kick in.
It is good for individuals to have an equity position way to invest. Plans I have heard of that link savings to the acquisition of Treasury bonds worries me because a substantial part of your retirement savings is already represented by your continued trust in the faithfulness of the federal government (Social Security). IRAs allow individuals to be unconcerned about capital gains, dividends, and interest and how these various actions are treated for tax purposes.
Forcing someone already making minimum wage to contribute an additional 2 to 5% of their income into a retirement account is just cruel. They are relying on the subsidizing of Social Security in how their benefits are calculated. Social Security will be all that they have, and I am a strong proponent of making it stronger. It represents the best hope for those individuals. The only other argument would be to carve off a percentage of the current withholding and allow them to redirect it into a personal account (sounds like George Bush).
I have been a working engineer my entire professional career. I am not a rich person. I am thankful for the 401(k) and IRA plans. At least in my case they have motivated me to save.
The taxes get paid on IRAs eventually. In the event of death the non-spouse recipient has to pull all the money out in five years at ordinary tax rates. The tax liability of IRAs represents an asset for the government for future expenditures when this money is finally taken out for retirement.
Now if you want to focus on something that costs the treasury dollars lets look at trusts.
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