Retirement

After a sim has acquired four traits (not including Good Upbringing) and you are level 16, you will have the option to retire your sim. Once you retire the sim, they will get gray hair and become no longer playable. They will stay in your house until they move out.

Once your sim is capable of retiring, you will get periodic offers to retire the sim. There is currently no way to turn this feature off.

Retiring a sim
Click on the blue Sim button at the bottom left of the screen to see the sim's menu. The menu has four tabs: stories, contacts, stickers, and traits. If the sim has all four traits (not including Good Upbringing), then the traits tab will have a "Retire Sim?" button.

Retired sims leave a random heirloom behind for your home. Then, a slot opens up for you to adopt or create a new sim.

If your sim is wearing one of the Izzy items upon retirement, the item will still be available for your new sims to wear in the closet. For example, it's possible for a retired grandma and her granddaughter to be wearing the same Izzy item at the same time.

Your retired sim
Retired sims get gray hair, and their necks are stooped forward. You can no longer control them.

Early retirement
Retired sims will live in your home for a while. From time to time, you will see a pink Family Event bubble over their head. If you tap it, your retired sim will offer a Mentoring event for your current sim.

As you do not control the sim, they will just wander around the house, and perform random idle actions such as sitting in chairs, looking at their phones, or sleeping in beds.

Late retirement
Eventually, you will notice a blue birthday cake bubble above the sim's head. When you tap it, the sim will move out of your house. You will no longer be able to call them over to socialize after this. (Presumably, they are so happy at their retirement home that they don't want to leave it.) However, tapping your family portrait will still let you see the family's generations, and a picture of the retired sim.

It is unclear exactly when this new stage happens, although it might after be a few Mentoring events are completed.

Retired friends
When another player's sim retires, that sim will still be around town as much as they were before. You can still do events and actions with them, and give them stickers. The retired sim will simply no longer have a diamond over their head.

When befriending an elder sim, you can play the Better Late than Never relationship story.