We are on well-water and have iron and sulfur-reducing bacteria in the aquifer in this area. While not harmful, it can be a nuisance and clog the plumbing if not kept in check. We keep the tank at 140 degrees because that's bactericidal for them. We also swapped out the anode rod from a magnesium one to an aluminum/zinc one. They can use magnesium as a food source.

That temperature is also bactericidal for Legionnaire's Disease. That particular critter is not just an issue for hotels and conference centers. It can be found in residential water heaters too: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2094925/

I believe this may be more of an issue in Canada and northern US for some reason, although that perception could be mistaken. Most findings I've heard of seem to have been in those regions.

We have a 40-gallon tank. The higher temperature, by mixing with some cold, gives us extended showering water when we do back-to-back showers.

We don't have children in the house, so potential scalding is less of an issue for us. We just pay attention when we run the hot water. But one could always install anti-scald devises on the fixtures to eliminate that.

We've periodically weighted the pros & cons of going tankless when it's time to change out the heater. No water storage = less issues with iron/sulfur bacteria. But the higher mineral content (we do have a softener) increases servicing costs. Plus the additional installation costs, flow issues to multiple fixtures used simultaneously, no hot water at low flow rates, etc, etc.

We have a gas tankless in Portugal so we have some first-hand experience with their pros and cons. I'm still on the fence about the cost & practicality of it here and if it would be a good fit to our hot water usage patterns.

Laura