MY main concern about allowing this as a norm stems from a previous game, where all the players ended up trying to kill their characters. The DM wouldn't allow retirements so death was the only way out. It got quite farcical and certainly detracted from the enjoyment of the game. I'm hoping that allowing retirement will allow the PC's to play what they want, I was just a bit worries about another - unforeseen - pitfall.
Most of what people have said allays that fear, but I might have a progressive penalty, of 0, 1, 2... levels lower that the party average, to make sure players REALLY want to change characters.
I would strongly suggest instead of having a penalty that you talk to your players instead and find out if they're bored with their characters or are otherwise unsatisfied with the characters they have. This is especially important if these characters are only the first or second characters for 5e that your group has played with. In any edition of the game there can be concepts that sound awesome as an idea but turn out to be anti-fun at the table for an individual player. I tend to allow players to change their characters whenever they want to and come in with level equal to the rest of the party. For my players at least the real place where churn happens is levels 1-5 or so of a new edition - as they're messing around with different ideas and trying to figure out what the right fit for this edition is for them. After that they understand the system enough to make good choices and they tend to pick characters that they will have fun with.
Now if you have players who are just looking to have more variety in general - or who bore easily and have a need to try new characters constantly - consider allowing them to have a "character pool" of 2-3 characters that they can swap into the group as the story allows. That way if they start getting bored with their Barbarian they can swap him out for their Warlock or their Cleric and take part in the game. It can give your sessions a more "guest star of the week" feel for those characters, but it can work and can be less disruptive than having a player constantly wanting to change their character to something else because they're bored.