You make a good point… Negro and Colored were once the polite ways to refer to Black Americans, but each generation replaced them when they started sounding old-timey.
In other words they weren’t offensive until a generation came along and decided they sounded old.
I like the explanation that someone is not operating at their total capacity, because that’s in line with the literal definition of retarded, which is slowed down, hampered, held back, inhibited (like flame retardant). If anything, the word to me removes any “blame” on the individual even.
I do use the word because I think censoring individual words is the slippery slope to mind control. I never say it to offend or to hurt any individual. But some things going on in clown world today, I just can’t describe them with any word more accurate than “retarded”.