DH retired last year and took his pension as a lump sum. We are planning on soon building a house and considered paying cash. However, taking the money out is, of course, taxable and would throw us into a very high tax bracket. Basically, we would pay about half the price of the house for the taxes. That is, if the house being built was $250k the taxes would about $125k!
At this point, we are probably going to get a construction loan and then a mortgage with the plan to pay it off over a few years but withdrawing over a period of years so we don't get thrown into a high tax bracket.
All of that said, I did use Firecalc to see what would happen if we paid cash for the house even though doing so when you factor in taxes would reduce our money by about 30%. Firecalc says we would still be fine doing it but I'm still reluctant. We still haven't totally decided which way to go.