House Mercere is family, so they look after their own. That's what they do. And it is what people do in general, in most societies, and in particular in medieval Europe. That the Oath is for life has already been said. Hence it would be absurd if a retiree would be cast out or left to starve.
Retirement could mean two different things, one can retire to `desk duties', or one can retire to interest payments and benefits. I think it is mentioned several places that redcaps no longer fit to travel, retire to less strenuous work, such as clerks to the house or the tribunal. In my mind, there are a lot of such clerks in the Order, not so much the obvious copyists that make such an impact on covenant stats, but more importantly the secretaries who keep records and accounts of all sorts.
Innkeepers actually feel less likely to me. I have a feeling that it is mentioned because the friendly inn, with an innkeeper with an interesting past, is such a popular trope in fiction. It happens, but it probably does not happen more often than the story requires.
Can people/redcaps retire to live on benefits or interest? @silveroak is of course right that that it is hardly possible in a modern sense. There are several possibilities,
- Monasteries - and covenants - and presumably Mercere houses too - are households which take care of their members and staff. Taking care of disabled employees has been common, if not universal.
- Vis banking is canon, and some magi pay silver for vis, so living off interest is possible for redcaps.
- Business shares pay dividends, so investing money in business could provide a pension, with the caveat that a businessman has to manage the business, and a sleeping partner may be ill thought of and possibly cheated.
A common form of retirement which goes way back to before modern banking and pension arrangments, in cases where farmers own their land, is to get room and board for life as part as the sales term, regardless of whether they sell to their heirs or sell out of the family. I would be surprised if this does not occurred in medieval times, and it seems like a plausible option when a retired redcap innkeeper can no longer keep his inn.