How does one properly dispose of old and worn priestly vestments?

Once something is dedicated to sacred use, it should not then be converted to ordinary use.
 
Older vestments are often sent to missions. But if they are too worn, they ought to be burned, and their ashes collected and buried in an out of the way and appropriate place.
 
This is a general rule for all sacred, blessed objects and sacramentals. Sacramentals, such as scapulars and prayer books, should be burned and then buried. Larger sacramentals that don't burn should be altered so that they no longer appear to be a sacramental. For example, a statue can be broken up into small pieces and then buried. Broken rosaries can be further disassembled and burned or buried. Objects made of metal can be taken to a sliver‐plater and melted down and used for another purpose.
 
Some hesitate to break up or burn sacred things. But it is generally held that items lose their blessing if they are substantially worn, such that they can no longer be used.