It depends on your age and what tax bracket you're in. If you are younger (50's or less) then leave your 401k alone.

This is a personal decision. Most real estate professionals will tell you that you're better off paying as low a down payment and as low payments as possible. This allows you to leverage the fewest dollars into the most gain. But your objective isn't strictly gain on the property. And, depending on your risk profile, you'll be happier with more in the property so you have lower or no payments. You need to discuss this with a financial advisor so you understand the implications, but you need to realize that the right answer isn't always how you make the most money for the smallest investment. Sometimes the right answer is what feels good to you.

Is your 401k stash taxable when you take monies out? You have so many options; take the mortgage and take the tax exemptions on the interest. However, you might want to look at self directed 401Ks or IRAs. These vehicles alllow you to invest your monies in various areas, i.e., real estate (all variations), gold (bullion, coins, stocks), private loans, etc. Once your investment realizes a profit or is paid off, the earnings and the profit go back into the account, tax free! This is WAY BETTER than the standard IRA or 401K method of saving!

Cash.

You're retired. If you got sued for I don't know what and lost your investments, how would you pay that mortgage? Remember the home is exempt in most states as your Homestead, no one can touch it except a mortgage lender.

Safety says pay cash for it.

If this is your retirement home and you will be there for awhile, just buy it cash if you can. That's the difference, is that you can. Why pay unnecessary interest? Especially if you have access to that much money. Own it free and clear, no more headaches with that bill, and you still have plenty of money to live on comfortably. You could put the rest in a high interest CD and live off of THAT interest!