If your aim is to retire in Panama, there is no need for you to obtain citizenship or a Panamanian passport. However, you do need to apply for a residency visa. The best option around is the Permanent Residency for Pensioners or Retirees.
The one important requirement is that you are already receiving a formal pension either from a government agency (such as Social Security) or from a private entity, of at least US$1,000 (or its equivalent in a different currency) net per month. Just showing your income stream such as rental income or that you obtain regular funds from your wholly owned company is not enough. The paperwork you need to obtain to qualify in Panama for the residency visa is straight forward if you have a government pension. Private pensions need much more and it is really important that you get good advice prior to arriving in Panama so you have everything needed.
If you wish to work in Panama, then you must obtain a residency visa which offers you the possibility of obtaining a work permit. Only a handful of residency visa options allow you to apply for a work permit In Panama the work permit is never automatic, as in the U.S. when someone gets their green card, they are authorized to live in the U.S. and work. Here you must have chosen a residency option that allows for a work permit and then apply separately before the Ministry of Labor.
The easiest residency option that allows for the possibility of a work permit, is the Permanent Residency for Nationals of Specific Countries (aka Friendly Nations), but this is only available to citizens of 50 countries (including the U.S., Canada, and most European nations).
You may contact me for a full list of countries and also for the full list of requirements for the above mentioned residency visas.
The main reason why one would need to pursue citizenship and a Panamanian passport, would be if the profession you wish to practice in Panama is reserved to Panamanians.
Residency visas are relatively easy and fast to obtain, however, the citizenship process is lengthy and requires that you renounce your existing citizenship.
Before you start gathering documents, make sure you have been advised on the best options and requirements for your particular situation.