When your Sim reaches Level 16 they have reached retirement age and you can choose to retire them in exchange for a heirloom for your home. Heirlooms are beneficial as they help future generations of Sims such as granting new traits and helping with their career progression. Although a retired Sim will stop living in your home you will still see them around the neighborhood. Even if you have a particular Sim you don't like it is always worth getting them to Level 16 just so you can get them out of your house and collect the heirloom. Remember, there is no way you can delete Sims.