The length of the field should be chosen appropriately because it has an effect on index performance and storage because longer values make for more data pages. Of course, if the data is real, i.e., the real values need to be that long, you need it. So, if you have a 50-character field and the longest value is 10 characters, the index won't take up any more space than if the field were 10 characters.
But choosing an appropriate limit helps with designing forms and reports -- if you make the field too long, you may end up with outlier records that don't display/print properly. On the other hand, you don't want it to be too short so that users can't fit normal data in it. Field length is the most basic form of data validation, because you are deciding what the range of appropriate values is for that field.
My basic principle is that I pick the shortest possible field length for data that has a regular format (even if it has occasional exceptions), but am generous with fields that do not.