you will know when the time is right. we had a half-stray cat around the house for over almost two decades (she didn't want to come inside the house, just hang around the property, eat our food, and get some attention from time to time). she never was the fittest cat, lost her teeth pretty early, drooled a lot. but she was pretty cool and was accepted by our house cat.
sudddenly she started coming into the house, becoming very passive and sleeping most of the time. the vet said she had bad kidneys and that she wouldn't last much longer. we took her back home and i guess she had another few weeks worth living, still enjoyed being petted, ate etc.
few weeks later she started refusing to eat, didn't purr anymore (which she basically did all the time) and looked miserable. at that point i knew that euthanasia was the best (or at least a good solution) to minimize her suffering. it was a hard decision, but in retrospect i think it was the right thing to do. just trust your feeling, don't wait too long, but don't rush the decision either.
@shadrach: my condolences! it's never easy losing a friend, be it man or beast.