Are you losing money in your tax-deferred 401(k) and IRA accounts?

Here's a thought that may add to your pain: If you held those same investments outside of a retirement fund, you could be using them now to cut your taxes. Instead, you'll wait years, rebuild your balances, and pay full income taxes on every penny that you use -- possibly at higher tax rates than you're looking at now.

That's one of many reasons some financial experts are now warning savers not to overdo their retirement account contributions. It's counter to what they've been saying for years, but the disadvantages of having all of your money socked away in tax-deferred vehicles can come back and bite you.

While conventional wisdom has traditionally counseled investors to defer the pain as long as possible, that wisdom may be changing, Louisville, Kentucky, financial planner Jim Grote writes in a recent issue of The Journal of Financial Planning. Investors who take current tax benefits by investing as much as possible in pre-tax accounts like IRAs and 401(k)s feel the pain of those benefits later by paying ordinary income tax on retirement distributions.

It's not clear whether those future taxes will be higher or lower than they are now by the time investors retire and are ready to tap that money. Many Washington-watchers look at Federal tax deficits and the possibility of a Democratic Congress and White House, and suggest that tax rates are going up. But retirees who move to low-tax states or live on less in retirement than they do while working may find themselves in a lower tax bracket later, even if tax rates rise.

Financial advisers are giving greater weight to a new concept called tax diversification. The idea behind it is this: If you retire with your money in different pots that get different tax treatments, you'll do better over the very long term. It's never a good idea to make taxes the primary emphasis of your investing and retiring plans; instead consider taxes and aim for the best post-tax returns over the long term. With that in mind, here's how to determine whether tax-diversification can help you, and how to achieve it.

-- Study your situation carefully, especially if you are within 10 years of retirement. What is your tax rate now, and what do you expect it to be then? Figure that out by guesstimating your post-retirement taxable income and where you'll live. Learn the rules about taxes on Social Security benefits by reading IRS publication 915. They are complex but here's the bottom line: The more taxable income you report in retirement, the more your benefit gets taxed. So living solely on those benefits and taxable withdrawals from tax-deferred accounts could raise your total tax bill considerably.

-- Fit the strategy to your picture. If you expect to live on less in retirement or have a lower tax rate than you do now, keep plowing your money into those tax-deferred accounts. The savings now are nice, and probably enable you to put more away than you would be able to in after-tax dollars. If you expect to live large once you retire and expect to stay in place, consider tax-diversifying your portfolio.

-- Get a Roth IRA if you can. Tax-free income down the road may be worth more than tax-deferred income now. If you make too much to qualify for a Roth IRA contribution, (that's $114,000 for singles and $166,000 for couples), know that in 2010 you'll be able to move money from your conventional IRA into a Roth. You'll have to pay taxes on the tax-deferred money you move, but if you see 2010 as a low-tax year for you, it might make sense to put some money into a traditional IRA now, so you can switch it into a Roth then.

-- Own some individual stocks or slow-trading stock mutual funds outside of your retirement account. You can sell when the market is down and bank the losses against other gains. You can reap rewards and pay only 15 percent capital gains taxes on earnings, instead of the 25 percent or more that you're likely to pay on income from retirement accounts. And, if you find yourself needing some money pre-retirement, for items like college tuition, weddings, home improvements or more, you can tap this money without a slew of rules.

-- If you already own individual stocks, consider taking some winnings off the table before you retire. Capital gains rates are about as low as they've ever been, and not everyone expects that to last. And get busy while the world is selling off: lock in those losses. If you're lucky, you'll be able to use them to offset gains you get later in the year.