You seem to be asking two questions. Why 8%? And why age 70?
The very short answer is “The last time Congress passed a law on these points, 40 (!) years ago, that’s where the political compromise Ouija thingy stopped moving.”
A slightly more nuanced answer to the first question is that the 8% figure represents an actuarial break-even for the SSA at a particular assumed interest rate. Which interest rate was a reasonable one at the time the law was passed.
IOW, when the SSA did a NPV calculation on paying benefits starting at age 62, 65, or 70, and using actual longevity data from the public at large, and the particular interest rate they picked as a benchmark, 8% popped out of the equation. So from the SSA’s POV it didn’t matter when anyone, or everyone, took their benefits, it was a wash financially for SSA. At that assumed interest rate.
The gotcha for the SSA is that Congress did not write the law to revisit the SS benefit growth percentage as interest rates might have changed in the future. It was locked into the law. So during the last 20-ish years of very low interest rates, waiting to age 70 has been a one-way bet where the individual citizens win and SSA loses. In some hypothetical future era where interest rates are a bunch higher, the winning move for the citizens would be to start taking SS at age 62.
We are now in 2023 in an intermediate case where waiting to 70 is still a winning move, but not by nearly as much as it was before. Which way future interest rates will move is, of course, utterly TBD & hard to predict.
As to the age 70 decision, it’s a lot murkier, and much more political than actuarial / financial.
For the large number of Americans with little savings, they need to keep working until SS eligibility in order to eat & have shelter once their wages stop. Part of what SS does is permit the oldsters to retire rather than stay to die on the job, which retirement creates empty jobs sooner for youngsters to take sooner.
In an era of higher youth unemployment, encouraging shuffling the oldsters off to retirement is a way to address that. In an era of labor shortage, encouraging the wrinklies to stay on the job longer keeps the economy humming.
At the time the law was passed 40(!) years ago, age 70 seemed to be a reasonable upper limit that would drive the last of the low-wage holdouts out of the working economy and free up those jobs. Consider the difference in the type and quantity of low- and mid-wage employment available in the early 1980s vs the early 2020s and you quickly see how mismatched this decision is versus the current situation.
And, just as with the 8% thing, Congress did not include any language for them or SSA to revisit these age limits as the relative demographics and unemployment situation shifted in the future. So age 70 is now in effect a highly arbitrary decision that is not necessarily a good fit for today’s economy.
There is a third factor you did not mention. The so-called “full retirement age” or FRA.
When this whole law was passed, the FRA where you’re entitled to “normal” benefits, neither discounted nor augmented, was set to age 65 as it had been under prior law. So a person at that time could choose between benefits up to 3 years early and up to 5 years late vs “normal”.
The same law also introduced the sliding scale of FRA by year of birth, intending to both phase in later retirement gently with many years’ notice so folks could plan ahead, and also to insulate the then-current politicians from the voter backlash because they’d be retired before any voter actually experienced a later FRA 20-30 years hence.
Right now the FRA is 66 years 8 months for folks retiring now. It increases by two months every year. But the age 62 & 70 are unmoving boundaries. So now a person can chose between taking benefits between 4 years 8 months early up to 3 years 4 months late.
Under current legislation the moving FRA will stop in a couple years when it hits age 67. At which point the benefits options amount to up to 5 years early or 3 years late vs FRA.
Whether any of this is logical or well-suited to the current economic or demographic situation is almost immaterial. It is what it is, Congress is utterly constipated, and here it will stay until a crisis looms unavoidably.
Had Congress revisited this issue honestly every, say, 10 years since 1983, doubtless all these factors would have changed a time or three. But they didn’t and now any adjustments will be larger, more abrupt, and with less lead time for the affected individuals. Gee thanks Congresses.