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Good point.  In the case above, because it creates an advantage, then an equal "punishment" should be out there.  I think that's the important thing to weigh here, advantage vs. penalty.  If a club can save 1/3rd the contract value, then the cap penalty should reflect that.  Perhaps in some way it could be the balance of what you'd be saving against the min vs. what the player was signed for.

This is why I liked the annual contract adjustment based on tiers.  It simplifies these sort of things.

I disagree on the auto-adjust, because it removes a lot of negotiation about deal structuring. That ship has sailed, though, so instead of hashing that out again-

I think that you're touching on the penalty valuation here in a helpful way. However, after listening to this discussion I would say that I'm in favor of removing the retirement penalty IF the max contract length provisions in 1.2 are retained.