Nasties can grow in dark, hot, wet places (tanks, pipes) up to around 130 something. That's why commercial set-ups use 140 as a set-point (commercial kitchens use 180 for sanitation purposes). Unfortunately, 140 will also scald the heck out of you, so the commercial systems use mixing valves to drop the delivery temp down to about 110, losing another 5 degrees on the way to the faucet where it comes out at a nice, state mandated 105. (Degrees F, that is, for all you international folks.)
Mixing valves are expensive things, so you don't see them on residential systems. 120 is kind-of hot, and definetly in potential scald territory. Hot water is worse than say, a hot radiator. You touch a radiator, get burned, pull away fast and say 'ouch. Done deal. You stick you hand or body in scalding water, get burned, jump out and continue to get burned by the film of water on you. You say 'ouch' a whole lot longer, even with much lower temperatures.
I can't say that I've ever heard of a "nasties-growing" issue in residential systems, but that's not to say it never happened. I suppose you could raise the temp once or twice a year. Burn everything out, then clean the pipes with the super-hot water, drop the temp and then let the tank recharge to the normal temp.
You can also cheat the size of your tank by raising the temp. It takes less GPM at 120 to mix with cold water to make your hot water, effectively making your tank 'bigger'. But at the risk of burning. If you're ging high on the tank temp, I'd recommend "Pressure-balancing" shower valve ($) and maybe even sinks ($$). These maintain the desired water temp even with big, momentary changes in water pressure (can you say "flush"?).