The 35-year-old will play in his 30th and final Merseyside derby this weekend, after which he will have just two matches left in a distinguished career with the Reds.
"Last week at Newcastle (in the 6-0 victory) how he marshalled the defence and how he played - everything about his game is at the top level," said the Reds boss.
"I can't think of enough words to describe him. His performance level has been incredible.
"It (retirement) is such a shame because he probably could play on but he has already made his mind up.
"His dream was to go out at the top and he is fulfilling that dream because he is a top operator at this level.
"But his concentration will be on the games and no further than Everton."