I strongly agree with AJ (at least in concept of comparing after tax to after tax benefits; I would use different percentages, and thus order, for fund distribution).
Shorthand on this thread seems to be Roth for Roth IRA and 401k for Traditional/Deferred 401k. Please keep in mind there is a Roth IRA, Deferred IRA, Roth 401k, and a Deferred 401k.
On the topic of "tax gaming":
- many early retirees (who actually stop earning money) can expect to be in a lower bracket (relative to rest of contemporary taxpayers) when retired.
- big savers who keep on working cause they love it (or who have large nonretirement investments) can expect o be in a higher bracket (relative to rest of contemporary taxpayers) once they can retire.
Note that neither of these takes into consideration whether the percentages associated with these brackets will change. I personally expect that US tax rates will rise over time.
For those with the luxury of higher savings, if you are looking to max out retirement savings, Roth has the benefit of effectively allowing another 33% retirement savings (100% posttax = 133% pretax at the 25% bracket).
For those reasons, since I can afford to do so, I am doing Roth (IRA and 401k) as much as I can. Also, it just feels good to know that the money is post-tax. For those invested in stocks/bonds, it does not matter, but for those of you in self-directed nonstandard assets like houses/mortgages, there is one other perk of going Roth - you can find and manage 25% less deals in a Roth to get the same benefit as you would from a traditional account.
One side topic - if you have significant (15%) taxable dividends and long-term cap gains, there is also the large benefit of tweaking any given year to be just at the top of the 15% income bracket to get the very desirable 0% tax rate on these investments. I am regretting starting with traditional, then moving to Roth (rather than the other way), since I have put myself into the position where I can no longer game that (unless I make nothing on my taxable investments, that is.) (Employer plan does not offer the new "Roth your funds whenever you want to" option that was legislated last winter.)