From an article in the Herald-Times on Sunday, regarding what e-mail messages on government e-mail accounts should be public records and which should be retained::

In Bartholomew County, things like personal correspondence, meeting reminders, non-email communications or routine information requests that do not result in administrative action, policy decision or special compilation are not considered part of public record.

All e-mail sent and received by government e-mail accounts should be public record, including personal correspondence. That account belongs to the taxpayers. Obviously, there should be exceptions for things that are specifically protected by law, but that is very limited. (And sensitive information should not be sent via e-mail anyway, because of security.)

As far as retention, there is the issue of storage. You can crash an e-mail server by having too much on there.