Let's say your FRA is 67 but you filed at 62 and your monthly benefit was $1,000/mo (to use a round number). However, you worked during that time and over the five years you had $36,000 withheld over that period of time (to use another round number).
At age 67, the SSA would take that $36,000 of withheld benefits into account (three years of benefits) and start paying you as though you started collecting benefits at 65 (three years) instead of at 62.
Which would be $1,259/mo instead of the $1,000/mo you were eligible for at 62 (8% increase per year by waiting).
So in practice, you would recover that withheld money back over the next 139 months (about 11.5 years).
All of the above is not factoring in COLA but hopefully that explains the basic methodology.
The recovery time is why I took mine starting the day I retired. I was 64 and couple months at that time. I got laid off, retired and started my SS all at the same time. Yeah, but where is it all now? LOL! With no guarantee of how long I’d be drawing my SS...............Take it when you can, if you can. Some folks don’t make 67. Just sayin’.
“To explain it simply (as the SSA jargon can overcomplicate everything), it goes something like this:”
...I make 100k+ and I’m 63 and 7 months. If I file now, will they take every penny of my SS benefits until I’m FRA? Or do they take a portion?