It's true, there are no eternal players in football, what happens is that new players will be born and old players will retire, and so on. However, what makes the difference is whether the player will retire when their abilities are still very good and are still very much needed, or they will retire when they no longer have the ability to play. And Toni Kroos has decided that he will retire while his abilities are still very good and are really needed by his club and country.
It is quite difficult to find a player like Toni Kroos, but it is not impossible that there will be a new player born who will replace Toni Kroos. This is a very normal thing in football, because we cannot expect players to be able to play forever. Many star players have to retire and we have seen this from generation to generation. There is always renewal, therefore the regeneration process will always exist.
If he felt that it becomes more difficult for him to maintain such a high level of the game as before, then it is better to leave when everyone will remember you as best of the best. Moreover, he did not completely leave football, he will continue to work in Real, and will train young players, and perhaps once decides to try to continue his career in the role of a coach. He has every opportunity to leave football in his life as long as he wishes.
every player has the choice to reduce his activity in football or to totally go off the football space at whatever time he chooses to. Some might choose to go off while they are still relevant like what Tony Kross has done while others might play till they've lost all the energy and glory they once had at there prime like what's happening with Christian Ronaldo and Messi. We have to know that outside of football, some of this guys had other things they are passionate about and would want to use the rest of thier life's to go about those things. Even though Tony Kross has retired at this time, looking at his performance at the Euros, it send a strong signal that if he was interested in playing for the next two to four years, he will still play as a world class player.
With respect to having the potential of taking up a managerial role in the future, I think he's that kind of player you're certain will do well as a coach and that might be one of the reasons why he had chosen to retire at this point so he work behind the scene to build his coaching prowess for a number of years and develope into a matured coach.