I'm also American West Coast. I think it's fine and normal to say, "How is your retirement going?" If you have friends that are newly retired, it completely makes sense to me. I wouldn't ask them how they spend it necessarily because it could be asking how they spend their retirement - as in pension. This would be inappropriate.
The "se" in this sentence is the reflexive 3rd person object pronoun. Since it is reflexive, it refers back to the subject of the sentence, which is "(ta) retraite," "your retirement." The reflexive verb "se passer" means to take place or to happen. The question is HOW (= Comment) your retirement is happening / taking place / going (as we would say, in English). The French verb is seen most often (I think) in expressions like "Qu'est-ce qui se passe?", "What is going on / is happening?"
When I saw this I thought that se passer must be reflexive but it seems not.
Se passer most often means "to take place," "to happen," or, in reference to time, "to go by":<pre>
Qu'est-ce qui se passe ? What's going on? Tout s'est bien passé Everything went smoothly Deux jours se sont passés Two days went by</pre>
We don't have an equivalent direct object in our English translations, but "se" is the reflexive object pronoun in French. "How does your retirement pass itself?" makes no sense to us. "How is your retirement going?" does, but dispenses with any word-for-word equivalent for "se" .
I think the point here is that the subject of this sentence is ta retraite. It is the retraite (retirement) that is happening or taking place (se passer). The question is: this retirement of yours, comment - how - (good, bad, slowly, painfully, thrillingly, etc.) is it happening. We don't have a smooth way to say this literally in English, which is why we get the approximation, "how is your retirement going?"