ANSWER: Hands-down -- own! You get to realize any appreciation in the property and you avoid rent increases, although property tax increases can be just as burdensome.
With mortgage rates at their lowest level in close to 40 years, I don't think you have to tie up all your wealth in real estate by paying cash for your new home. Assuming you can use the mortgage interest deduction on your taxes, you should be able to conservatively invest the proceeds from the sale of your current home so they earn an after-tax return higher than the after-tax cost of debt on your new mortgage. You can improve your odds of that happening by using a 15-year fixed-rate mortgage, or a 5/1 adjustable-rate mortgage.
You didn't state when you plan to retire, but you're no doubt close enough that you shouldn't be taking a lot of risk in your portfolio. Keep three months to six months worth of living expenses in an investment that you can easily access in a fiscal emergency. Don't ignore the need for growth in your investments, but try to avoid taking unnecessary risks to achieve that growth.
