I have purchased 1Password 3 in 2010. So I used it three years without any upgrade costs. For an application that I use everyday, it's certainly worth $25. Although, the pricing is steep for other reasons: I have recommended many non-techies to use 1Password, but they would never spend $50 on a password manager.

I won't purchase the upgrade to 4 immediately. 1Password 3 is still working fine. Shared vaults look to be a nice feature, but other than that I don't think I need any of the changes.

Besides that, I'd like to see how good the iCloud Keychain will work in Mavericks/iOS (although it is not a cross-platform solution, Agilebits' Windows and Windows Phone apps haven't been stellar either).

If you bought in 2013, it is still free.

Paid upgrades aren't a terrible thing. They allow you to continue to fund development on improved/better versions.

Without that, you risk ending up up like Sparrow or TextMate.