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what temperature should my water heater be at?

I'm a family of four, and in the morning, usually two-three of us take showers after each otherWe don't really use hot water that muchOur laundry is done not using our water (we live in an apartment) and we don't use the dishwasher too muchI've heard keeping the water heater at 125 F is warm enough to take showers and do things around the house, and hot enough to kill jerms, yet not too hot and result in saving energyWhat is the ideal temperature for a water heater? Also, do those water heater blankets really work in keeping the heater warm and saving energy? I'm thinking of buying oneAnd when winter comes along, should I rise my water heater temperature? I live in So Cal, so it doesn't really get that cold, but still; should it be higher in the winters?

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