I don't know, maybe gives some kind of bonus.

There's no bonus or reward for retiring a horse. Sometimes people buy a horse if it's cheap enough because they may want/need it but then realize after buying it it's star rating isn't what they like, or if they gene test it and it doesn't have a any genes they were checking for. Could be many things, but retiring a horse doesn't give any reward/bonus! 

I've bought cheap horses before just to check what their breed standard is (to try to find the perfect standard in a breed) and retired it after.  I try to limit it to foundations or badly statted (so an older horse that hasn't been trained/shown much) so I'm not just retiring off someone's pride and joy.  

Yeah haha I am usually annoyed when someone retires a horse they bought for me or even bred from my horses. Like I know they can do what they want but just give em to mw haha I generally have decent horses so I often feel its a waste but to each their own 

I try to limit my early retirements to either foundies I just bought that don't have the genes I'm looking for, or horses I've owned for awhile that are over age 10 and under level 30.  Or Marwaris/Tekes that have hit their offspring limit.  With the foundies, I'm not retiring someone's pride and joy.  With the others, at least I've given them a chance.

And even when I do retire the over 10/under level 30 or offspring limit horses, it's usually because I've run out of stable space.  Otherwise, I'd be keeping them as career horses or the like.