Modric is indeed a great player. His body is not as good as the players in Europe, but he has advantages in handling the ball and with accurate passes.
Modric really understands the game requested by Ancelotti. he has played for Madrid for quite a long time. and his departure will still make his name great in the eyes of fans.
Now he is 38 years old, he plays for Madrid and the Croatian national team. I think he will definitely choose to give a young player to replace him. If he retired now, Modric would also have to be proud of his achievements throughout the history of his professional career.
His age and physical condition no longer support him playing at Real Madrid because Ancelotti has been using more young players to help his team. Modric does have good skills as a midfielder, but his physical ability is no longer capable of playing fully, making Ancelotti have to try to provide opportunities for young players. Modric has helped Real Madrid a lot in winning the title and his name will always be remembered as a Real Madrid legend.
Now there is no certainty regarding his future, whether he will retire or play for another club. Still, if he has no intention of retiring then going to the Saudi Arabian league is a good decision because there are many European players who have played there before.
I think Ancelotti still needs Luka Modric in his team that's why he is still keeping him in the team despite his age but for his physical condition Modric is very feet just that Ancelitti is building his team around younger players because they are the future of the club since the older players doesn't have the much time to spend in the club again. Modric may not have much playing time in Real Madrid again but his impert in the team can't be forgotten and when Real Madrid is having difficulty in the midfield Modric has always been introduced and he does wonders in the midfield when ever he is introduced in the game this alone will not let the Madrid coach to let him leave in a hurry.
For a player like Modric going to Saudi Arabia won't be a problem for his because he is a skilful player but it will be left for him to make the decision to either join the Saudi Arabian teams to make more money or to take a break from playing football.