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I still believe that my scenario is "safer" for someone in the intermediate stage of still working and not having accumulated the full amount necessary for a "safe" withdrawal of 4% during retirement. But, for someone already retired, a paid off mortgage makes more sense since it reduces the amount needed for a safe 4% withdrawal.

Not everyone relies on their investments for their retirement--some of us have decent pensions. My pension plan's payout would be equivalent to getting a pay raise the day I retire, so I wouldn't need 25 times my annual mortgage payments to be able to safely handle the mortgage. In fact, I wouldn't need any of my investments once I retire in order to afford my mortgage.

Of course, different people's situations are different; I just happened to luck out working for an employer that offers a great retirement plan and have already put 20 years of duty into that plan.
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