Does both the pistons suppose to retract back fully after releasing the brake?
My rear XTR disc brake piston on the left side do not retract fully but the right side is.
There is a drag as the wheel slow down and stop quickly when I spin it.
Is this normal?
Is my disc pad and rotor contaminated with oil as my rear brake is now making a real loud squeeking noise whenever I use the brake.
Or it is something else?

Thanks.

Sounds like it is time to go get it bled.

How often should I get mine bled?

Check the manual. They usually recommend to change the fluid every couple of years or so.