Primer for non-US taxpayers:

There are two basic kinds of retirement savings/investments in the eyes of the IRS: tax-deferred accounts and tax free withdrawals on principal that has already been taxed (let's call them Roth accounts). Deposits into tax-deferred accounts are not taxed as income, but withdrawals are taxed at normal income tax rates. Deposits into Roth accounts are post-income tax, but anything you withdraw in retirement - including interest/earnings/gains/dividends - is completely tax free. There are various rules and limitations (e.g. contribution limits, income levels, what can/must be withdrawn when, etc.) for the accounts, but let's assume you have a chunk of money that can legally be invested in either one.

So (US people, start reading here):

How does one decide which account to invest a chunk of money into? The basic calculation seems pretty straightforward - take your current tax bracket and savings rate, extrapolate your target nest egg to get a rough idea of your tax bracket in retirement, and compare. There are a few wrinkles - it will generally make sense to have at least a little money coming out of a tax-deferred account to take advantage of federal income tax deductions and exemptions (otherwise known as free money), though Social Security benefits or other pensions will also have to be taken into account for tax ramifications.

But I think the bigger issue facing someone who's currently in a fairly high bracket (say, 25% or 28%) is what their expectations are for tax rates in the future. Even if their tax burden in retirement would be lower under current tax law (suggesting a strategy leaning towards tax deferred accounts), what about policy/political risk? If taxes rise decades from now, wouldn't a Roth strategy make more sense?

This is a difficult call - I personally haven't a clue what will happen with tax law forty-odd years from now when I retire. Of course, the easy solution is to just keep a mix of tax deferred and Roth accounts to diversify around such 'political risk', but that's obviously a lower yield solution than if tax trajectories can be reasonably predicted. Plenty of pundits argue that higher taxes are inevitable in the future, but a forty-year time scale is awfully hard to be sure about.

Do any of you have ways of hedging this risk? What about successful predictive models to guess where tax rates (and related financial policy) are going? Lastly, is the relative popularity of Roth accounts since their inception point to long-term pessimism about US tax rates, or is it indicative of assumptions of rising personal wealth - or something else entirely?