It depends on the player, if you release a player, he may retire if not picked up immediately or may wait years to be given a chance to come back. DMF as for your John Terry thing, maybe he just retired, I mean it's very unlikely he'd accept a contract at anyone else anyway.
I remember on the free player databses where everyone was released, lts of world class players retire after 6 month - 1 year beause they haven't signed for a club yet, it's a bit weird but it's just how the game works. Also a lot of youngsters retire if released by your youth squad.