What I've generally seen is that the faculty member uses their current letterhead which , in this case, would be from a different school. The letter will say "I knew Yellow Trees when he enrolled in my class, Chem 202, at Podunk College in Spring 2017." Often a letter will close with something like this, "based on my 15 years experience at Podunk College and now in my position as professor of chemistry at Sossow University, I would place Yellow Trees among the top 10% of students on the pre-med track. I highly recommend..."
I have even seen a letter from a university president who taught the applicant a couple years earlier when the writer was a college professor at a different school. Obviously, the power of the letter came, in part from the letterhead that was "Office of the President".
Oops! I missed that OP's situation is that the professor is retired. In that case, she should just make some personal letterhead which is easy to do with software these days.