The legendary Blues captain has not been offered the new contract he desired and looks set to leave come May.
He revealed earlier this week that he wanted to realise his dream of retiring at the club.
"Ideally, I would have loved to stay, but the club's moving in a different direction," he said, as reported by the BBC.
"It's not going to be a fairytale ending. I'm not going to retire at Chelsea, which it took me a couple of days to get over."
Terry is something of a controversial figure in the game after a number of incidents both on and off the pitch throughout his career.
Pundit Shearer knows a thing or two about being a Premier League legend as the top flight's reigning record scorer with 313 goals in 622 career games for club and country.
'Chelsea making mistake of Gerrard proportions'
"I am in some ways surprised that Chelsea are allowing John Terry to leave at the end of the season," Shearer told Coral.
"He has been a phenomenal player for the club. He has won trophies left right and centre.
"I would have thought the club might have come to him and offered him a job for life in some capacity.
"It’s very similar to what happened with Steven Gerrard at Liverpool. He wanted to stay around, but the club had other ideas. When you come to the end of your career and your football club feels you have no use to them, then I am afraid it is farewell for you.
"Terry has shown unbelievable commitment and loyalty to Chelsea. I know he has played through injuries many times and put his neck on the line.
"He led the club as captain for many years and has won everything there is to win. He’ll rightly go out on a high with a great reception and he deserves it."
If interim boss Guus Hiddink has anything to do with it, he will be urging the Blues hierarchy to follow Shearer's advice.
Speaking in the wake of another superb Terry performance in the 0-0 draw against Watford on Wednesday night, Hiddink said the 'door is not closed' on a new deal for the defender, as reported by the Guardian.
Perhaps the whole ordeal is Terry's way of orchestrating a longer-term contract at the club.
Time will tell if he gets his way.