By Scott E. Davis, Esq. Without debate, we can agree the past two years in the stock market have been financially unbearable. But if you think the stock market has been bad, let's discuss another scenario that may be the "mother of all bear markets." Unfortunately, this financial fiasco commonly occurs to people just like you. How do I know it occurs? Because I listen to the stories literally daily. Indeed, the severity of this financial decision makes the stock market meltdown of 2000 to 2002 look like a walk in the park. Whether intentional or unintentional, falling into this trap will cost you disability income, retirement income and pre-retirement Medicare health insurance. The total financial loss varies, but I have seen this scenario cost people as much as $90,000 in past-due benefits alone! To be sure, that amount does not count the lost future benefits which easily dwarfs the past due benefits. I have commonly seen the amount of lost past-due benefits exceed $40,000. Query…how many financial decisions do you make in your life carry that carry an opening price tag of $40,000 with the amount escalating as you age? My guess is not very many. Perhaps most heartbreaking is that a small amount of education makes this problem entirely avoidable! What in the world am I referring to? Answer…Not filing a social security disability claim with the Social Security Administration (SSA). Without exaggeration, the decision to file a social security disability claim could be the most important financial decision of your life. I am not trying to melodramatic, rather, I would like to have your undivided attention for a few minutes. Reading this article and sharing it with family members and friends should insure that no one you know will make this mistake. Indeed, this article is also relevant to those who are still working because one never knows what the future may bring; nobody ever plans on becoming unable to work. Mistake #1 Not filing a claim because of your own denial Many people do not file a disability claim because often they are in denial about their inability to work. I am not suggesting you should file a disability claim the day after stopping work, in fact you should not. However, after being off work for six to12 months you should be in a position to know whether you can return to and sustain full-time work. Many people wait to file a claim, hoping they will recover and return to work. Fortunately, people often need only a few weeks or months to recover fully. However, the "wait and see" strategy often lacks direction and becomes clouded due to our denial mechanism. America was built on perhaps the strongest work ethic in the world. Americans often take pride in driving themselves into the ground despite what their body or mind tells them. We do not want to believe we cannot work; it is not fashionable in this country. Thus, most people hope for years they will get better and delay or forget to file a disability claim. All the while, they struggle financially when they could be receiving disability benefits which would significantly ease their stress, making it easier to recover. Instead, try this strategy…Make a decision to file a disability claim the moment you or your doctors believe you will be unable to work a minimum of 12 consecutive months. This could occur the day after you stop working, or within six or 12 months of your last day at work. However, I generally recommend waiting a minimum of five months to file a claim to allow sufficient time for you and the doctors to see how your condition progresses while not working. This strategy also parallels the eligibility requirement for SSA disability benefits. In order to be eligible, you must be unable to work for a minimum of 12 consecutive months - you do not have to be permanently disabled. Thus, when you expect to be off work for 12 consecutive months, file your claim with SSA by calling (800) 772-1213 or by visiting a local SSA office. There is no charge to file the claim and it takes only minutes to do. Mistake #2 Not filing a claim because "I don't want to live off the system" Another common reason people do not file a disability claim (when they should) is they "do not want a government handout or to live off the system." For those who have worked at least five of the 10 years (the years do not need to be consecutive) before they became disabled, this notion is pure nonsense. It is critical to understand that you have a disability insurance policy with SSA and the federal government. How did you obtain it? Remember all the money you paid in for W-2 withholding or self-employment taxes to Uncle Sam? Some of the taxes went to pay for SSA retirement and disability insurance. Thus, you have already paid Uncle Sam the premiums for a disability insurance policy. This insurance policy is no different than your health, life, auto or home insurance…the disability policy just happens to be with SSA. Indeed, filing a disability claim is not living off the system - it is collecting benefits from an entity that forced you, through mandatory withholding, to pay for the insurance in the first place! You would not dream of losing your home to a fire and then not filing a claim with your insurance company. Similarly, with regard to disability insurance, SSA is just another insurance company. The sooner you get over the "living off the system" frame of mind, the sooner you will be in a position to file your disability claim and make a smart financial decision that is in you and your family's best interest. Important Tip: At the very latest, file your SSA disability claim within 18 months of becoming disabled. The financial meltdown I referenced earlier invariably occurs because people wait too long to file a disability claim with SSA. Why does it matter when you file? SSA will only pay monetary benefits for a maximum of 12 months prior to the date of your application. This is true regardless of what date you became disabled. Because there is a six-calendar-month waiting period before you are eligible for SSA monetary benefits, you can wait a maximum of 18 months to file a claim before it starts to cost you money each month. By way of example, let's assume you became disabled on February 1, 2001, but did not file a disability claim in 2001 because you thought you would get better and return to work. You finally decide to file your claim in August 2002. However, the most SSA will pay in retroactive benefits is 12 months prior to your application date, or back to August 2001. Assume SSA agrees with you and finds you became disabled on February 1, 2001. The 6 month waiting period means you are first eligible for benefits beginning August 2001. Since August 2002 is 18 months after February 2001, August 2002 is the absolute latest month you could wait and still obtain all the monetary benefits you are entitled to. The financial fiasco begins when you wait more than 18 months after becoming disabled to file a claim. Why? Again, because SSA only pays retroactive benefits for 12 months prior to your application date, regardless of the date you became disabled. To see how quickly you can lose benefits, assume this time you decide to wait until August 2004 to file your claim. Let's again assume SSA finds you became disabled on February 1, 2001. Like the prior example, after the six-month waiting period, you remain eligible for monetary benefits beginning August 2001. But since SSA only pays benefits 12 months prior to your application date, the first month you are entitled to receive monetary benefits is August 2003. The difference between when you were first eligible to receive benefits (August 2001) and when you actually are (August 2003) is 26 months. If we assume your monthly benefit amount is $1,000, your decision to wait two years to file your claim cost you $26,000 in retroactive monetary benefits. Of course, you would continue to receive the $1,000 per month into the future as long as you remain disabled, but the $26,000 is forever lost. The prior example illustrates how expensive it is to wait beyond 18 months to file a disability claim. Imagine how staggering the loss can be if your family's monthly benefit is $2,000, or if you never filed a disability claim with SSA. Conclusion In summary, hopefully you understand that you do have disability insurance with SSA and how critical it is to file a claim in a timely manner. By waiting five months to file your disability claim with SSA, you will give yourself and your doctors adequate time to determine if you will likely be unable to work for a minimum of 12 consecutive months. You will also protect all the monetary benefits you are entitled to when or if your claim is approved by SSA. Finally, you will avoid a financial trap that unnecessarily claims too many victims. Remember - never quit and keep fighting for the benefits you deserve! Scott E. Davis is a social security and long-term disability insurance attorney in Phoenix, Arizona. Mr. Davis represents clients throughout the United States. Although Mr. Davis has experience representing clients with a broad spectrum of physical and/or psychological disorders, the majority of his disability practice is devoted to representing individuals with chronic pain and chronic fatigue disorders. In almost every case, a fee is charged only if his client obtains benefits.