Palmer, the No. 1 overall pick by the Bengals in 2003, was unavailable for comment as he and his wife, Shaelynn, were awaiting the birth of their third child.
A Bengals spokesman had no comment. The team has Palmer under contract through 2014.
Palmer has become the object of fan frustration in the past two years and sources said he has grown frustrated with the team's inconsistencies. The Bengals finished 4-12 in 2010.
Sources familiar with Palmer's plan and mindset said he is financially secure for the rest of his life and willing to follow through and retire.
Several teams will be in the market for quarterbacks this offseason. Seattle will have an opening at quarterback if the Seahawks can't re-sign Matt Hasselbeck. Palmer won the Heisman Trophy for now-Seahawks coach Pete Carroll at USC in 2002. San Francisco, where his wife was raised, and Arizona could also be options.
Palmer suffered a major knee injury in a first-round playoff game against the Pittsburgh Steelers at the end of the 2005 season. He also suffered an elbow injury in 2008 and considered Tommy John surgery before choosing to rehab without having the operation.
Chris Mortensen is ESPN's senior NFL analyst.