More recently, Fabrizio Romano wrote that Kroos was extending his contract with Real Madrid and would remain for another year, and just a few days later Kroos announced his retirement

A few months ago, Real Madrid were quite confident that Kross would extend his contract. However, it seems like there is already a clue as to how long Kross will be at Real Madrid. He stated that the thing that could convince the coach that Kross would retire was his attitude at the very top level. And his achievements this season have truly been achieved. Toni Kross and Real Madrid have managed to win the La Liga trophy and also the Champions League. Oh yes, previously, I thought Modric would be the one to retire first, it turns out it was Kross.
Judging by Kroos's explanations, this was his thoughtful plan and he made the decision a long time ago, it was not an impulsive decision at all, he planned to end his career at exactly such a point - close to the peak so that he would be remembered this way. I think real insiders should have known about this because even if Kroos didn’t tell anyone anything, preparations for contract extensions and other formal matters are underway long before the new season begins, so there were 100% signs that Kroos wanted to leave/end his career.
The fact that Modric wants to play for another year is of course surprising, I don’t even know whether he has passed the point where he should have finished or not, but if next season he has less ambitions (regarding playing time as he had this season), then he will be useful for Real Madrid for another season.