Retirement is the official term for a punishment which can happen to demons if they mess up. The name is a euphemism for a never-ending torture known more informally as "The Eternal Shriek". It is first described by Michael in Chapter 7 when Tahani is preparing for Michael's retirement party.
Retirement is described by Michael in Chapter 7:
Michael: Its an extreme form of punishment. We call it "The Eternal Shriek". My soul will be disintegrated, and each molecule will be placed on the surface of a different burning sun. And then my essence will be scooped out of my body with a flaming ladle and poured over hot diamonds.
Tahani: But the diamonds are lovely...?
Michael: They're not. And then what's left of my body will be endlessly beaten with a titanium rod.
Tahani: Like a piñata. [Indicates a piñata she has made in the form of Michael]
Michael: Yes, except you have the string around my waist, but instead it will definitely be around my genitals.