If you are applying for Social Security disability benefits it’s a good guess that you are not working and thus have no source of income. You’ve heard horror stories about friends and family applying for disability benefits and trying to do it by themselves. You don’t want to do this alone. You want to hire an attorney who knows what to do and how to present the best case possible right from the beginning. But how do you afford to hire that attorney?
The Social Security Administration (SSA) recognizes an individual’s financial situation when one is applying for benefits. They know you can’t afford to pay an attorney an hourly rate, so they came up with a standard fee agreement used across the board by all disability attorneys. This allows you to get proper representation and the attorney to get fair compensation. The attorney’s fee comes out of any retroactive benefits you receive.
What are retroactive benefits?
Retroactive benefits are the back benefits from the date you became disabled up until the date of the final decision approving your case. The attorney will not have any claim towards your monthly benefit going forward. It is solely concerning any back benefits you may receive.
For example, you stopped working on January 1, 2013, because of a severe car accident where you broke your back. We would use January 1, 2013 as the disability date, which happens to be the same date you stopped working. You filed an initial application for disability benefits on June 1, 2013. You were denied at the initial and reconsideration stage, but after an in-person hearing, you have finally approved benefits on December 1, 2014. In this case, you would receive back benefits from the disability date of January 1, 2013, up through December 1, 2014. Your attorney’s fee comes out of those benefits. It is 25% or a maximum of $6,000, whichever amount is less. Your back benefits are calculated based upon what your monthly benefit would be if found disabled. This is based upon the amount of taxes you have paid into the Social Security system throughout your work history.
Important Points to Remember When Calculating Back Benefits
- One thing to remember, for disability benefits there is a blanket five-month period where you cannot receive benefits. This starts from the disability date and you count five months forward. Taking the five-month waiting period into consideration, the example above would mean your retroactive benefits would be from June 1, 2013, through December 1, 2014. The average monthly benefit amount is approximately $1,200. That would mean you could expect approximately $21,600 in retroactive benefits. The attorney’s 25% of that amount would be $5,400. Since that amount is lesser than $6,000 your attorney would expect a fee of $5,400 for the work they did throughout your representation.
- Another thing to remember when calculating back benefits is that you are only eligible to receive those benefits up to 12 months prior to your initial filing date. In the example above, the furthest back you could possibly go would be June 1, 2012, which is 12 months prior to your initial filing date. This is not a problem in this case because your disability hadn’t begun until the accident you sustained on January 1, 2013. But it is important to keep in mind the 12 months prior to your filing date rule. If you want to maximize your potential back benefits I recommend filing an initial application as soon as possible…as long as you have the medical evidence to support your disability claim. This is where it becomes important to speak with an attorney about what to do. There is more legal strategy in applying for Social Security disability benefits than most people think. And no amount of research online will prepare you for exactly how to strategize your claim.
How does my filing date affect the benefits I’ll receive and what I’ll have to pay a lawyer?
Let’s do another example of when the filing date will come into play. Say you have done hard physical labor your whole life and the past few years started having worse pain in your lower back and both hands. The pain finally got so bad you stopped working on January 1, 2011. For the next two years, you did odd jobs around the neighborhood all under the table and nothing more than $200 a month. Your doctor told you on January 1, 2013, that you need to stop pushing yourself and recommended you file for Social Security disability (SSD) benefits. You took a few months to consider this decision; you were not quite ready to admit that you are limited in your physical abilities. You finally filed for benefits on March 1, 2013. You were denied at the initial and reconsideration stage but finally approved after an in-person hearing held on July 1, 2014. Your retroactive benefits would consist of the time you stopped working full time (which was January 1, 2011) until the date of the hearing, which was July 1, 2014. Taking into consideration the blanket five-month wait period you would potentially be eligible for benefits for a total of 37 months. However, because you waited to file your initial application until March 1, 2013, you would only be eligible for benefits from March 1, 2012, through the hearing date of July 1, 2014, thus equaling 28 months. If your monthly benefit amount is $1,200 then waiting to file until March 1, 2013, cost you approximately $10,800 in potential back benefits. That’s why I say it is important to apply for disability benefits as soon as you feel you are unable to work full-time.
Calculating retroactive benefits can be quite confusing. Luckily this is something that Social Security’s payment center will handle. What you can expect if you are approved is first the payment center will start your monthly benefits. Then they will calculate your retroactive benefits, pay your attorney their fees and then send you the remainder.
The most important thing to remember when considering hiring an attorney to help with your disability claim is that it is nothing out of pocket for you. The fee is contingent upon the attorney winning your case. This is good motivation for the attorney to provide you the best representation possible. If they don’t win then they don’t get paid. Why not let someone who is experienced do the leg work for you? This way you will know you are doing the absolute best you can regarding securing your financial and medical insurance future.