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.
Its over for Luka Modric's future with Real Madrid after announcing not extend his contract and Modric will be free agent player for next season, currently Real Madrid have many youth midfielder and I think right decision made by Carlo Ancelotti not giving him extend contract one year later. In this season, Luka Modric losses his position as main player and get less minutes playing in La Liga or Champion League match with Carlo Ancelotti prefer using Toni Kroos on every match as regular players.
Luka Modric not confirming yet his future team after leaving Real Madrid, linked with Saudi Pro League teams or he will stay for playing at any European team depend his potential still compete for getting regular position. I think Luka Modric has one year left for playing with European team and too easy if acceptable Saudi Pro League teams offer.