That depends on a few things, including local laws and regulations. In general, I'd replace when you start having leaks/holes in the system that could allow gasses into the cab, if the muffler is becoming too loud, or if it starts falling off.
Don't get bogged down here trying to get some expensive free flowing system chasing power. These Jeeps don't make enough power to utilize big pipes or much more flow. I suggest focusing on quality of materials (stainless vs steel) and muffler sound. The stock system should be fine. You might find a muffler that flows better with a little extra sound, but it won't make any significant change in power or fuel economy.
The O2 sensors will have to remain. Removing the cat may be illegal in your area. If you decide to delete the cat, you will have to figure out a way to "trick" the rear O2 in order to make the computer think it’s there and working. With modern catalytic converters, there really isn't a reason to remove it. Today's cats are essentially free flowing and actually do work to reduce emissions. I suggest keeping a cat in the system.