That never really made sense to me. A fighter in 1e doesn’t get abilities to build a stronghold and gain followers until 9th level. Why would you retire a PC from play once you’ve gained the only ability of note that you get?
I also never read it to mean that you automatically retired, just that you could if you wanted to do so. It was also not a requirement to build a keep, it was just an option. In the rare cases where I got PCs to that level, the adventures just included things like defending your keep or having a base of operations.