You can only improve so much at 32. He has just lost the slight edge in speed and natural strength that youth brings. He can probably continue where he is now for another year then drop further in the rankings.
I won't say he needs to retire because that's completely his decision. If he feels comfortable becoming a player that may win a round or three in tournaments, with the possibility to get to a final now and then, if he feels comfortable being ranked #20 or #30 instead of top 5, then he can continue playing as long as his body allows him to continue.
It is a bit sad to watch a player, once so great, go through this, but everyone does. It's inevitable.