I usually remove them from the mod group and send them a message at about the same time. The idea is that you don't want to risk someone flipping out and breaking things.
Here's an example of a real de-modding message from my site (some personal details removed for privacy):
Hi USER NAME,
I'm doing some cleanup of the forum user groups and I was thinking it's probably best if I remove you from the staff user group--for low activity. I've rather enjoyed have you on as a staff member while it lasted. Know that I still like you (you're actually one of my favorite Star Army RPers because you make me laugh and you always keep things low drama), and you're still in good standing but I also think it's fair to say that that you're not on much lately or posting much and you don't seem to actually 'do' any staff duties that justify the title. Basically I see you're obviously busy doing other stuff these days and that's okay, but I don't think it's fair to either saddle with staff responsibilities you can't fulfill or fair to have members coming to you for staff needs that you might not be able to promptly respond to.
Thanks for your understanding and know you're always welcome on Star Army and I hope to keep seeing you on the forums whenever you're able to visit.