This recalculation works as follows:
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Prior to full retirement age, if you earn above the earnings limit, SSA reduces your benefits temporarily.
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Upon reaching FRA, SSA recalculates your benefits to give you credit for all the months reduced or withheld due to those excess earnings.
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Your monthly benefit amount is increased going forward to effectively "repay" you for those withheld amounts.
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This means you recover most of what was withheld, so the earnings-related reductions before FRA do not permanently reduce your lifetime benefits.
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From the month you reach FRA onward, there is no earnings limit, and no further benefits reductions occur regardless of how much you earn.
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SSA notifies you with a letter explaining any increase in your benefit after recalculation at FRA.
In summary, this recalculation ensures that income-related benefit reductions before full retirement age are offset by higher benefits after reaching full retirement age, protecting your overall Social Security income over time.?
