iPhone 5 or Playstation Vita?
1) iPhone 5
2) PS Vita and iPhone 5S (which should be out by then if you're planning on a December upgrade)
Based on that, I'd say definitely go for second option. An iPhone 4 is still a pretty decent device and can definitely be carried on until the end of the year. Just as you start to feel the performance issues of iOS 7 on your then aging iPhone 4, you'll be really glad for the iPhone 5S upgrade! :D
iPhone 5 (ATT, Boston):
The thinness really does matter. LTE is really fast, but not many apps are optimized for it so besides email, webpages and Pandora, the internet isn't much faster. The apps that have LTE are much faster tho. I had an iPhone 4 as well before my upgrade and the upgrade in speed with OS 6 makes the phone much faster, almost so that the better chip in the iPhone 5 isn't as big a deal if you've already upgraded your OS.
My favorite gadget. 5 inch OLED screen is beautiful, the touchscreen, touchpad, accelerometer, and physical buttons work beautifully together. My only gripes are with the memory card and the battery life. The memory card is a real issue. I have an 8gb memory card, which is sufficient for what I need, but I am less tempted to buy more digital games because I've filled up the card. I have deleted games I've beaten, but refuse to spend $80 on a 32gb card since I could buy at least 3 games with that. Games that I love on the Vita: WipEout, PS All Stars, Mutant Blobs Attack, Uncharted Golden Abyss, Mortal Kombat, Sound Shapes, Call of Duty Vita (only for multiplayer). Other games that were good are Resistance Burning Skies, Modnation, Marvel vs Capcom 3, Smart As... and Escape Plan.
I don't want to make this post too long, but be patient with me.
Buying an iPhone 5 will allow you to sell your iPhone 4. You should be able to get at least $100 for it, maybe over $150 that you can put towards saving up for a Vita. The experience isn't much different than you current iPhone, but the improvement will positively affect you everyday, whereas there are times when I don't play my Vita for a week or two, especially if I'm not traveling.
If you have a PS3 and are a PS+ member, then the Vita is definitely the way to go. There are a lot of free games on PS+ that help decrease the cost of ownership of the Vita for now. If you don't have a PS3, then buying a Vita will be costly in that the games are not cheap (at least $20 for many), the memory card and most importantly you won't be able to sell your current iPhone.
The Vita is my favorite gadget because it's like having a PS3 in my (large) pocket/bag. It's a bit of money pit, but my only regret is that I can't play it more, much like I wish I had more time to play my PS3.
The iPhone is the more practical gadget, but don't think you can "game" on the iPhone in any acceptable manner compared to the Vita. I would suggest that you lean towards getting a new iPhone, sell your iPhone 4 and save towards a Vita knowing that a price drop is imminent this calendar year and the awesome games I've mentioned above will only get cheaper.
When you get a Vita, add me on PSN: nitehawk766