Springfield Penitentiary and the Retirement Castle are both unlocked at game level 19. Remember that the game level and the XP level are two different things. If you’re as addicted to the game as I am and play frequently, then your XP bar may well be telling you that you’re at a much higher level before you can unlock these buildings. But, as always, to unlock either Springfield Penitentiary or the Retirement Castle, you need to have first unlocked all the buildings and characters that come before them on your build menu.

This walkthrough begins just after you build Luigi’s (and you can find the walkthroughs for every building and character up to this point on the walkthroughs page):

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1. Moustache Toppings Luigi arrives and, afraid that if his moustache gets and longer, it will get caught in the dough mixer (because that’s how his mother died), he pays a visit to Jake’s Unisex Hair Palace (4 hours – keep Homer free as he finishes).
2. A Jolly Right Mess As Luigi comes out of Jake’s, Homer catches him using a British accent. Although he’s able to explain it away, it’s a narrow escape, so he goes straight to work practicing his fake accent (2 hours – keep Chief Wiggum free as he finishes)
Note: While the next few things are going on (or possibly later), Luigi will also have tasks come up to work at Luigi’s and shop at the Kwik-E-Mart. Neither of these tasks appear to be part of Luigi’s main storyline, nor will they interrupt your game progress. Just do them as they appear.
3. Bring a Box of Donuts With crime rising in Springfield, Chief Wiggum goes on a stake out (24 hours and the task that had many people wondering how they could get Sarah Wiggum – see here)

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4. Crime Doesn’t Pay Unless You Make It With all this crime, Chief Wiggum decides, in a conversation with Lisa, that there needs to be some place to put the criminals, at least temporarily. And that means that it’s time to build Springfield Penitentiary ($46,000 and 24 hours, unlocking Snake – keep Lisa free as the build finishes).

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Note: There are some tasks involving Wiggum, Snake and the Penitentiary that may appear before the next task, ow while the Retirement Castle is being built. They include building some chain fences and making Snake Rob the Krusty Burger and pose for a police lineup.
5. The Greying of Springfield Lisa is worried about Grampa, whom she hasn’t seen since the explosion. While Homer and Marge are not in such a hurry to have him back, that means it’s time to build the Retirement Castle ($37,500 and 24 hours, unlocking Grampa Simpson – keep Lisa free as the build finishes)

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The walkthrough will continue…

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