I think that his age is proving to be too much of a disadvantage since his style depends too much on speed and agility, two things that often seem to fade with age faster than strength or power.
For sure his days of contending with top 5 fighters successfully are over. I think Machida has enough sense to realize that it is time to have one more fight with a mid tier fighter and then leave. The only issue would be if he has a sort of deep psychological addiction to fighting, which could require intervention.