The people with insufficient 401k balances aren't making the max. They're doing the minimum, starting too late, or selecting the most conservative investments such as bond funds (NAVs have collapsed) or cash. Many plans don't have good low cost index funds, so people are forced into actively managed funds some of which are complete garbage in terms of fees and returns.
Workers living paycheck to paycheck (61% of the population, see https://www.cnbc.com/2023/07/31/61percent-of-americans-live-...) means that contributions aren't realistic for millions of people.
Further, a lot of people don't understand how they work, and never contribute, even if they could. Even with matching contributions. Or, they don't trust them after the 2008 collapse or a vague suspicion that the system is rigged against them. This is what I hear from my spouse; many of her colleagues won't touch the solid 401k investments offered by their employer.
Some employers have made changes that makes it easier to get started, but many never will, assuming (wrongly) that social security is their retirement solution.
Your predictions about older workers working longer is correct. You can see it now, seniors working at grocery stores into their 70s and even older.