Sometimes an old athlete may want to come back for some special match. Some bettors might still bet on him despite of old age and lack of recent experiences in the sport. That is because of what we call nostalgia. They might recall the past memories or past performances of the athlete that may not necessarily reflect the recent performance of the athlete. So be careful when betting because you might just be nostalgic.
Aside from feeling nostalgia, I think fanaticism for certain teams is more dangerous. Loyalty and honor for the teams you like generally make people lose, or idolizing a specific player is another reason.
I don't see a problem with a retired player betting on a specific event out of nostalgia. As long as it doesn't cost a lot of money and isn't a recurring event, I suppose anyone who does it will do it for fun.