The use of rank titles after retirement was much more normal back around the time I joined the RAF. In the local pub a retired RN Cdr and a retired RAF Sqn Ldr would often call in - it was quite normal for them to be addressed so rather than as 'Mr.'
But the threat of terrorism over the following years meant that we were discouraged from using rank titles in correspondence or being seen out and about in uniform. So what was once normal simply faded out.
It's becoming common once again to see people in the local area in uniform and if they wish to be known by their rank when they retire, then so be it.