Do you know what's going to happen to the stock market next week? A month from now, will interest rates be higher or lower than they are today?

You might be willing to hazard some guesses, but chances are you don't have definite answers to either of those questions -- and you surely wouldn't bet your entire retirement on them.

This is why you have a well-diversified portfolio to safeguard against future bumps. But don't limit yourself to just asset diversification. Build a portfolio with plenty of tax diversification by having assets in each of the three main types of accounts: (1) taxable, where qualified dividends and long-term capital gains are taxed at lower rates than ordinary income; (2) tax-deferred (traditional 401(k)s and IRAs), where investments aren't taxed as they grow but withdrawals are taxed as ordinary income; and (3) tax-free (Roths), where growth and qualified withdrawals are, well, tax-free.

Most of us come up short in Roth assets, so we'll discuss those a bit. We'll also dig into the benefits of diversifying your retirement income taxation.

Gain More Control

When you have assets that are taxed at different rates, you have more control over your tax bill. If you need some income but are bumping up against the next tax bracket, you can choose to sell an investment in your taxable account and pay the relatively lower long-term capital gains rate -- or sell an investment at a loss to reduce your income. You could even tap your Roth.

More importantly, having control over your taxable income allows you to protect more of your Social Security benefits from taxation. You don't have to earn much for Uncle Sam to taketh what he just gaveth, and the computation is a bit complicated. Start with your adjusted gross income, then add one-half of all Social Security benefits and all unearned income received during the year (generally, tax-exempt interest received from municipal bonds). If the computed total is greater than $25,000 (single) or $32,000 (married, filing jointly), then up to 50% of the Social Security benefit will be taxed. If the amount is greater than $34,000 (single) or $44,000 (married, filing jointly), then up to 85% of the Social Security benefit will be taxed. These amounts aren't adjusted for inflation, so more and more retirees will actually be giving back their Social Security benefits in the form of taxes. You may be able to shield part of your Social Security from taxation by relying on income from a Roth IRA, which is exempt from the taxation equation.

And then there's Medicare. Higher-income beneficiaries will pay higher premiums for Part B. Your income calculation will be made by the Social Security Administration using information from your most recent tax return, and will be based on your adjusted gross income plus any tax-exempt interest. Distributions from Roth accounts will not be part of the calculation, so having a chunk of your net worth in Roth accounts reduces the likelihood that your benefits from Uncle Sam will be reduced by your income.

If Taxes Increase

No one can predict the future, but we, as investors, are willing to tilt our portfolios one way (stocks) or the other (bonds) based on factors such as history, economics, or risk tolerance. With tax rates at multi-decade lows (the highest tax bracket was 90% in the 1960s), large state and federal budget deficits, and the looming unfunded retirement of the baby boomers, tax rates will likely increase in the coming years.

This is yet another reason to have tax diversification in your portfolio. If current tax rates hold or move up only marginally, then Uncle Sam won't be taking so much of your taxable retirement assets. But if tax rates skyrocket, you'll be very glad you have sizable Roth accounts.

Increase Heirs' After-Tax Inheritance

One of the most underappreciated benefits of the Roth IRA is that owners don't have to begin taking required minimum distributions at age 70½. This allows those assets more time to grow tax-free. While this certainly benefits the account owner who doesn't need the money at 70 but does at 80, it's also a nice bonus for the account owners' heirs. Here's why.

The first reason, of course, is the larger inheritance due to more years of tax-free growth. The second reason is that inherited Roth assets are also tax-free to the inheritor (though they're subject to estate taxes if the entire estate is over the exempt amount). The potential to pass along a larger amount of tax-free assets is a nice way to keep tax diversification in the family.

Here's to keeping your portfolios padded and protected from Uncle Sam!