Naturally its good to have emergency $$$ outside of a tax deferred retirement account and that is what a Roth is great for. You can take the principle out anytime you want without penalty. I put in the maximum allowed for both each year.
But tax deferred 401K works great for me because I have a pretty good salary in a high income high tax state and saves me a bunch. Being over 50 allows be to put in double what I could below that.
Any $$$$ I tax defer gets denied to Obama to spend and then I dont have to pray for a lib to take care of me in retirement.
It reduces our taxes significantly, and also brings our adjusted gross income down below the threshold, so we can also make the maximum Roth contributions as well.
Assuming you have sufficient funds set aside for emergencies, deferring all this income has another benefit that many people miss: it imposes spending discipline. You can't spend these retirement funds on a whim. So you adjust your standard of living to the remaining taxable income.
When you retire, you don't have to adjust to a significantly reduced income. We will have almost enough income from various sources to replace our current income, and will only have to withdraw a small amount each month to make up the difference. Or, we can splurge and do some things we've been wanting to do for a while.
I actually expect to withdraw excess funds from our IRA/401(k)'s each year and either put it in the bank or "recharacterize" it into our Roth IRAs. I'll only do enough to bring us up to the top of the 15% marginal income tax bracket. If you are married, that's currently an adjusted gross income of $92,500. This takes maximum advantage of the lower tax rate, as it jumps to 25% after that. And, it draws down the IRA/401(k) balance, so that you reduce the Minimum Required Distributions that start when you reach age 70.