1. Pay cash -- particularly at 7%.
Financial success depends on both capturing the upside and minimizing the downside risk. When you're working, you can afford to focus on capturing the upside, because the continuous firehose of cash called a salary provides a lot of cushion. So you focus on big risks that can throw you off-target, like having an EF for if the job goes away and life/disability/medical insurance for when shit happens -- you're basically protecting that income stream/your ability to continue generating that income stream.
Once you decide to give up that giant firehose of cash, a big, giant cushion goes away. So minimizing the downside risk becomes more important. The good news is that you now have your own personal giant cushion of cash to ride on that is no longer depending on you working. So now you likely don't need life insurance or disability insurance any more, because you no longer need to protect an income stream that comes from someone else. You can decrease your EF. But on the flip side, it's now on you to manage that giant cash cushion so that it lasts for the next 40 or 50 years. You do that in part by your asset allocation; part of the reason to keep some of your $$ in cash/CDs/bonds/etc. is so you don't have to sell out at the height of a crash to cover daily expenses. But just as in pre-FIRE, reducing the amount of cash you need every month to cover your spending is a very powerful shield against running out of $$. Sure, right now, it looks like a wash. But what is the worst-case scenario you're protecting against? If you get a stock market crash, that 2-3% withdrawal rate can suddenly become 4-5% -- and now you have a bigger nut you have to cover, too.
Leverage is a very powerful tool when building wealth, because it multiplies the impact of the growth in value -- and, in the instance of a home, allows you to keep more money in the stock market, with its high-growth potential, while still capturing 100% of the growth in value of your home price (because you capture all of that regardless of whether you own 1% or 100% of that house). OTOH, leverage also multiplies the impact of loss of value; if you have 10% down on a home and the home loses 20% in value, you now owe the bank more than the home is worth. There is a reason highly-leveraged businesses tend to run in a boom and bust cycle. Once you FIRE, the latter becomes far more important than the former. So what if a mortgage might allow you to die with $40M instead of $30M? Who gives a fuck? You'll be dead! And the $30M scenario is still 5-10x what you might even possibly need to cover your expenses. When you've won the game, stop playing.
2. Figure out your desired AA once you FIRE, and start to move toward that now.
When you move from the growth phase to the "make sure it lasts 50 years" phase, you need to look at your portfolio in a different way, because now you have to focus more on both mitigating risks and taking $$ out. None of this should involve drastic change; what we've done is to start to direct new $$ into the areas we haven't previously focused on (like bonds). So if you're a few years out, this is the perfect time to start focusing in on how you want your portfolio to manage your future retirement phase.
FWIW, my plan to mitigate risks of having to sell in a downturn is to keep 3-5 years of expenses in a bond/CD ladder. That's the perfect kind of thing to start a few years before you FIRE: if you want a 5-year CD ladder, say, then 5 years before your FIRE, you put one future year's expenses in CDs that mature in 5 years. Do that every year, and by the time you FIRE, you have that first year's expenses ready to go and your ladder in place. Then you keep doing that every year by converting investments into CDs. But if the market is bad, you can hold off on that for a year or two and just ride your existing ladder, before replenishing it when the market improves.
But there are a lot of other ways to do it, too. Some keep a set AA and sell what they need to to cover expenses from the overperforming sector. Some focus on dividend-paying stocks or rental properties or other investments that throw off cash. You just need to figure out what approach makes the most sense given your own goals and risk tolerance.
