The negative consequence of 401(k), IRA and other tax-deferred plans is that money no longer circulates through the economy. As so many pensions have been cut, or eliminated, people are forced to sit on their tax-deferred savings in case they need them, like cash in a mattress, and try to make no withdrawals until they are forced to.
Allowing tax-free withdrawals will result in seniors spending more in the short term, creating more jobs, leading to more taxes being collected.