I dread having to make this decision for my 28 year old mare, I feel for you!!
In my case, my girl is Insulin Resistant, has ERU [Moonblindness] and is mostly blind+has some daily pain from that. However, she's nearly arthritis-free, still enjoys running around her pasture, and going on long trail rides [mostly walking these days, just to save her joints and because she had to take last winter off, then lost all the conditioning she had had...it'll be too strenuous on her to get her back to where she used to be].
Anyway, last fall she tore/partially tore a suspensory [from running around too much! haha] and seeing her gimping around every day was killing me. I started talking to people about when/what would cause them to think it was "time" and I started talking to my vet about our options. Lacey was, by the vet's estimation, "the definition of pasture sound" and the vet said that she did not feel [after Lacey shoved the vet, with her head, for not petting her 'soon enough'! ha!] that Lacey was mentally ready to go.
We decided that when Lacey's pain/discomfort levels [from her eyes or from arthritis or from whatever may be down the road] hit 50% or higher -as in, she's unable to do 50% of her daily activities without pain/discomfort- in a way that's long term [a part of ERU is irregular eye episodes where she'll be in intense pain and on high doses of painkillers for a few days, but she returns to normal relatively pain-free levels after that time], that's when it'll be time. Or, of course, if she seems to lose heart in the world.
But, as SR pointed out, better a few months too soon than a week too late.
I'm hoping that 50% thing means I have many years left with her...but you never know. Anything can happen tomorrow.
This is the worst part of loving an older horse!