Xabi Alonso wants to win trophies with Bayern Munich in his final season before he retires in the summer.
Alonso, 35, announced on Thursday that he would bring down the curtain on his playing career at the end of the season.
"I always wanted to go out at the highest level, and there's nothing higher for me than Bayern," Alonso said at a news conference.
"I don't have any physical problems, but I think it's always better to say goodbye earlier rather than later."
"After a lot of thought now is the right time to stop -- but I will try and win everything this season before starting a new life."
He said the decision to call it a day "wasn't easy after 17 years as a professional" and that all his clubs -- Real Sociedad, Liverpool, Real Madrid and Bayern -- "will always have a place in my heart."
"I'm pleased and also proud," he added. "I still have a little time left to enjoy and I want to do that."
Carlo Ancelotti, Alonso's boss at both Real and Bayern, said: "I have to respect his decision. We are losing a fantastic midfielder.
"I am pleased to be able to train Xabi. He's a fantastic player, professional and person.
"We still have three months to work together. We'll try to win lots of trophies for him, for me, the club and also for [Philipp] Lahm.
"If he wants to be a manager, he has all the qualities."
Alonso paid tribute to Ancelotti for his guidance and influence during his career, saying: "I want to thank Carlo for our great connection at different clubs.
"I admire and respect him and have learned so much from him. I want to say thank you because he's been so important for my career."
Alonso said his time at Liverpool had been "spectacular" and added: "It's a very special club with all its tradition and history. From the first day, you realise how big a club it is."
Ancelotti was in charge of AC Milan when Alonso and Liverpool came from 3-0 down to win the 2005 Champions League final on penalties.
"I was lucky enough to play a fantastic final and to win a Champions League title that most people will remember," he added.
"At least we [he and Ancelotti] had the chance to win it back together at Real Madrid, and hopefully we'll have another chance here."