I don't get rid of favorites until they stop fitting, are damaged in an uncool way, lol (faded graphic tees, distressed jeans can be cool, pilling is never cool, or flaking of fauxleather), or are really really dated looking. Even the later I usually hold onto for another 5 years if it's in great condition and can be worn as lounge wear. I usually also try to revive them a bit along the way, shaving pills on sweaters, washing canvas sneakers, etc.
If they are far too damaged to send to thrift they get cut up for rags. Luckily I haven't had much dressy wear that wasn't okay to pass on, mostly jeans and t shirts that are past the 'painting gear' stage.