I don’t know the full ins and outs myself, but most of these VTubers are managed by agencies who own the rights to the characters they portray. The people behind the character get paid for their work, and they can choose to take better jobs elsewhere, but they don’t get to bring the characters with them. Basically like how Tom Kenny (voice actor for SpongeBob) can’t just decide to be SpongeBob somewhere else, he doesn’t own the character.

When a VTuber decides to retire or if they take a better job with a different agency, the character “graduates,” which I think is just used because it’s a softer word than “retire.” The fans just get to imagine the character is off doing bigger and better things, not that they’re euthanized or locked in a storage unit somewhere gathering dust. In theory I guess the agency could continue using the character for merch and promo material, or even recast, though I have no idea how well that would go in an industry with fans as obsessive as theirs.