They calculate how much you would get at your full retirement age of 66 by taking your best 35 years (indexed for today's dollars), adding them up and dividing by 420 (number of months in 35 years). Then they apply their bending rules to cheat high wage earners to benefit low wage earners. Anyway, they come up with a number that represents what you would get when you turn 66. If you retire at 62 you get 80% of the 66 amount, at 63 you get 85%, at 64 you get 90%, and at 65 you get 95%. So for every year you retire before 66 it cost you 5%. Here's the thing, if you wait until 63 to get a 5% higher amount it will take you 20 years to make it up.
