If a player clears waivers and I try to demote him and he doesn't accept it and wants to become a free agent am I responsible for the remainder of his contract? He has another year on his contract.

Yes, you would be responsible for the rest of his contract as it would be a release.

Designate him with waivers.  Once he clears, that should solve your problem.

This is after the deadline,I waived him with everyone else and he cleared, now I wanna demote him. His agent says he will opt to be a free agent if I do that .am I still responsible?

Yes.  Do what I said and he'll accept the demotion when he clears waivers.

Okay will do.

I wanted to tack onto this question.  I inherited a team with a 35 year old RF whose horrible numbers are only surpassed by his remaining contract (3/$22.5M).  I can't justify a big league spot for him and I'm wondering if I demote him if he'll opt to retire before his contract is up to free up some future funds.  Could that work?  If so, what would be the steps?  Designate for assignment and then demote?

No, he won't retire. 

Players under contract never retire.  No easy out of a bad contract.