L: This is one thing I try to implement; Pilot judgment, or pilotship as we like to call it. When we hone the skills of the student, he should be able to make that call according to his training of not only rules and procedures to follow, but also in pilot skills.
Personally I would retract the flaps to the amount a positive climb could be established, then the gear. It's better to have something to land on, right? Premature retraction of the landing gear could result in great humiliation!