Time Machine recovery help on new SSD

Hi everyone

Looking to upgrade and replace the hard drive in my iMac from a 1TB SATA drive to a 500gb SSD.

My main concern is applying the time machine back up to the new drive as I have the following scenario:

Time machine back up is over 700gb

New SSD drive capacity is 500gb

Would the time machine recovery fail because the back up size is greater than the new SSD drive?

Or is there a way where I can select what gets transferred/recovered from the back so it fits on the new drive?

At the same time I don't want to fill up the drive so quickly from the time machine back up.

Appreciate any advice.