I agree with what you said, in my opinion moving to the Saudi Pro League is a good opportunity before deciding to retire, there Modric can get a large salary and luxurious facilities like other former top European players. Modric track record with Real Madrid is very impressive, especially with the number of trophies he has presented for the club, he is the second generation of Los Galacticos. He has won various awards while strengthening Real Madrid, with increasing age and increasingly fierce competition in midfield, it is time for Modric to take a new path in his career.
Ancelotti and everyone at the club certainly want Modric to stay longer, but that is contrary to the club long-term goal of wanting generational renewal to be able to compete in every competition. Since joining in 2012, Modric has become an important player in Real Madrid main lineup. Modric has worked with a number of coaches who have managed Real Madrid, and he has always been a player they have relied on over the years. The increasing age factor means that Modric and Real Madrid management have to make a decision regarding his future next season. Many people will miss him, and Modric has become one of Real Madrid living legends.
At the age of 38, of course Luka Modrić is no longer able to compete in playing in the top European leagues, so it is only fitting that Luka Modrić spends the rest of his career playing in the Saudi Arabian league to collect more money and also there the league is not competitive making him Luka Modrić can still compete in showing his performance, which is different if he stays at Real Madrid.
Real Madrid only needs Luka Modrić to be able to guide young players so that there is regeneration in the Real Madrid team and he has been doing this for the last few seasons until now it is time for Luka Modrić to leave, either retiring or continuing his career in a non-competitive league. I think it's the same, those are two good options.