How to properly ID retired military personnel?

Here is the Air Force's Tongue and Quill electronic version which many services follow. Page 176 covers this for written correspondence and I would suggest you bookmark this if you do a lot of military correspondence. It also has some other good things that you might want to glance through and when speaking it would be US (the service) Retired Sergeant, John Smith

http://www.au.af.mil/au/awc/awcgate/edref/afh33-33...

When a retired Soldier signs something it is;

John Smith

SFC (Ret)

Saying SFC Smith would also be proper, unless it is necessary to point out that he is retired.

The US Army uses three letter capitalized abbreviations without periods.

PVT, PV2, PFC,SPC, CPL, SGT, SSG, SFC, MSG, 1SG, CSM, SMA

2LT, 1LT, CPT, MAJ, LTC, COL, BG, MG, LTG, GEN

The Brigadier and Lieutenant Generals are the only two letter abbreviations.

I think the second one is the right example: Sgt. John Smith (Ret.)

When military titles are used by members to sign their names to documents that pertain to them personally, they must show that they are in a retired status after the grade. Social and business calling cards must reflect the retired status.

2 is correct

ALL abbreviations require a period at the end.

The second one is correct. Abbrivations need a period (.) at the end of them.

As Linda said, the second one is correct.