The short answer is ABSOLUTELY (a good idea). I moved to PEI about 9 years ago and it was the very best thing I have done. While I didn't move here for retirement (I moved after graduating from university in my hometown of Montreal), I often feel as though I have taken an early retirement.
The way of life here is amazing; the people are so friendly, the pace is just perfect and there is so much to do for such a small place. All year there are shows at the Confederation Centre of the Arts, the Guild or many small halls around the Island.
There are walking and biking trails galore and the very best beaches. In the winter there are groomed cross country ski trails in different locations around the Island and a very "cozy" downhill ski park. This year when we had a slew of snow storms, we embraced it and enjoyed snowshoeing through the capital city and trekking to the store to stock up on storm day treats.
The restaurant scene is delicious and diverse. And somehow, it keeps growing and out-doing itself.
Don't get me wrong, sometimes I miss Montreal and crave just a little extra hustle and bustle - but it's nothin that a direct flight home to Montreal for a few days can't fix. And honestly, when I step back off the plane, onto Island soil, I take a deep breath of the fresh air, look for a familiar face or two, and feel so happy to be "home."
I should also note that I do know many people who have retired here and have kept very busy with "seniors college". There is every type of class and group imaginable offered and available to join - cooking, photography, walking, painting, gardening - you name it - they've got it.
If you decide to move here - chances are pretty good we may one day cross paths!
Good luck with the decision.