Having a custom 404 page can help you offer your visitors an alternative navigation method when they land on a page that no longer exists.
Google has posted recommendations online here: https://support.google.com/webmasters/answer/93641?hl=en
This article covers guidelines for creating the content of your custom 404 page. For information on configuring your server to display your new 404 page, check your server or web hosting documentation. You should still make sure that your webserver returns a 404 status code to users and spiders, so that search engines don't accidentally index your custom 404 page.