You get your choice of any character class that is available (i.e. has been unlocked another player isn't playing) except for the class you are retiring. This could be classes that you found somewhere or that another player has already retired or starting classes that aren't currently being played. Your new character will start at the Prosperity Level as the town, so as the campaign progresses, new characters won't be too wimpy.
(At least this is the way I understand it.)
EDIT: As confirmed below, you may select the class you just retired.