Bryan Menefee,
I will try to answer your questions based on the information you provided. However, please understand that I am only sharing my thoughts based on the information you provided. There may be other issues or facts that you have not shared that could change my opinion. I also have some questions based on your post.
I am currently in national guard and received medically retirement letter for hearing and diabetes.
I am not sure what you mean by "medically retirement letter." What did the letter state, and more importantly, what authority did it cite (normally, something like 10 USC [x,y,s] as the basis for the retirement)? This piece is very important to understanding your situation and absent an explanation about this, I am not sure you should take anything stated by me as anything to consider.
They both are considered non duty related.
This would generally bode poorly for you. But, I still need to know/understand how you/the military are coming to this conclusion. Do you have an adverse LOD finding for both of these conditions? Do you agree they are not in the line of duty? Need more information.
I have over 16 years military service which includes about 5 years and 9 months active duty service.
Consider this:
https://www.law.cornell.edu/uscode/text/10/12731b . You may well be able to still get a retirement even if your conditions are not currently considered in the line of duty.
Should I go to the PEB or take the medical retirement. Please help with information
I would need more information about your case to offer more. Generally, if there is a doubt about anything, going to the PEB is the better option. However, overall, you have not provided enough information for me to really understand what your current situation is and what your preferred course of action might be.