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most don't even have 3-5 years "spending money" (whatever that is) in total savings; if you're keeping that in cash you're getting 2-3% annually while the market has doubled.
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Last week I was at the bank in my hometown, a small rural community. The teller took a phone call, and I overheard her say "You have $1.53 in your checking account, and $150 in savings".

Presumably this is their total net worth. I think this is way more common than people on this type of forum realize. Most will work until they literally can't anymore, then scrape by on social security until they die. I think it's important to keep that perspective.

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When you're headed into retirement, one possibility is to shift to saving more in cash-like options instead of a 401k (or whatever). It's should just be part of your retirement plan to account for possibilities like this.
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And lose the tax advantages? That's crazy
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The comment parent to you said it poorly. The 401k is the container, you don’t move stuff out of it you change the investments inside of it.
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The tax advantages of being forced to pay ordinary income rates on your distributions as compared to long term capital gains (which are low, capped, can be exercised before a tax hike, and avoided entirely if you just need collateral)?
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401k lets you rebalance a portfolio with zero tax implications.

401k reduces your taxable income when depositing money.

The downsides are a 10% penalty for early withdrawal which makes them surprisingly bad for young people. They tend to start in lower tax brackets, have fewer reserves when unemployed, and face fewer risks from an unbalanced portfolio.

Pay down debt then Roth IRA when young 401k after 40 is often better than defaulting to a 401k, but saving anything tends to be more important than such optimizations.

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Sure, but we're not talking about people who have no savings. FIRE people have huge investment portfolios while being frugal with their spending, and understand the risk of keeping 5-10% of their total net worth in cash equivalents (not dissimilar to having insurance).
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People return with less than 4 years expenses in retirement funds

Surely you need about 20 years?

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Look back at the grandparent comment. If someone doesn't have 3-5 years in total savings, then they had better not try to retire.
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3 to 5 years of cash or a bond ladder won't help in a 1970s stagflation scenario.
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