"I'm not ready to play... I fought a lot knowing it was my last match of the season," the world number one, who had also quit midway through the Paris Masters tournament two weeks ago, told reporters following his 7-6(5) 6-7(4) 6-4 defeat by Goffin.
"My commitment was to try... I've missed this event too many times in my career," added the Spaniard who has been plagued by knee injuries throughout his career.
Nadal, who was hobbling around the court for much of the third set of his contest against Goffin, qualified for the season ending tournament for the 13th successive year but withdrew before the start on five previous occasions.
Monday's withdrawal means the 31-year-old, who claimed the French and U.S. Open trophies this year to increase his grand slam haul to 16 titles, has yet to win the season-ending tournament.
"I was not enjoying it (out there today) so it was no fun to play like this. But I had an unforgettable season," he added.
(Reporting by Martyn Herman, editing by Pritha Sarkar)