Seriously, nobody wants to read what Google has published a million times, before bitching about Google and it's "complete disregard for users' privacy"?
This is not news. Yes, Google collects your history and associates with your account _if you opt in_, OR it still collects the information anonymously. That's nothing new. Neither is Google the ONLY company doing it. Apple does it. Facebook does it. Microsoft does it. Every tom-dick-harry and their analytics suits do it. Your ISP does it. NSA does it. And your browser, your computer and your phone does it.
At least Google tells you what it collects, how, and let's you control it. It also tells you what happens WHEN YOU DELETE THE HISTORY: (https://support.google.com/accounts/answer/465?hl=en)
"When you delete items from your Web History, they are no longer associated with your Google Account. However, Google may store searches in a separate logs system to prevent spam and abuse and to improve our services."
Well, if you're going to be that paranoid, there's no guarantee that they're not still recording / saving all your searches after you disable saved searches.
The point I'm trying to make is either you trust Google to abide by your wishes and not save your search history, or you don't.
It all boils down to risk. Yes, there is some data that companies are required to keep for N years due to auditing, etc. That's unavoidable. But there comes a point where keeping data (especially personal information that is usually covered by numerous laws and 200-page policies from bodies such as the credit card industry) becomes a liability. Companies typically don't like liabilities, and therefor delete it.
Now, there are data that a company might consider keeping because the income generated by keeping it outweighs the risk associated by mishandling it. And you're right, there's no way of knowing what Google considers this to be. But that was my original point- if you don't trust Google to delete your history when you ask, then why do you trust them to not keep it in the first place when you opt-out?