By Adrienne Ross, CFP®, ChFC®, AFC®

Military service can be a fruitful career path. And as you get closer to mid-career, you have the option of receiving a special bonus called military continuation pay. This is a one-time lump-sum bonus that, while offering an enticing financial payment, if you accept it, you’re also agreeing to an extended service commitment.

Military continuation pay isn’t the right choice for everyone. For service members nearing their reenlistment decision, it can be a complex dilemma.

Let’s explore exactly what it is, who’s eligible, how amounts are calculated, and options for what to do with your payment. As experienced military financial planners, we want to help you make a confident choice about military continuation pay before you sign on the dotted line.

What Is Military Continuation Pay?

Like a bonus, military continuation pay is a direct cash payout that’s available to eligible service members enrolled in the Blended Retirement Service (BRS). It’s a way to encourage service members to continue their service by incentivizing them to reenlist for an additional service commitment. 

Continuation pay is payable between the end of eight years of service, and before the completion of 12 years of service, calculated using the Pay Entry Base Date (PEBD). Each branch determines when they will offer continuation pay during this 4-year window. 

Military Continuation Pay Eligibility

Not everyone is qualified to receive military continuation pay. Here are the factors that determine eligibility:

• Must be enrolled in the Blended Retirement System (BRS)

• Currently fulfilling between 8 and 12 years of service

• Meets service-specific requirements for rank, specialty, and other criteria

• Must agree to serve an additional obligated service commitment, which is currently 4 years for all branches

How Is Military Continuation Pay Calculated?

Each military department publishes their own continuation pay rate guidance using considerations like retention needs, hard-to-fill positions, and specialty skills of their department. Determining factors are continually updated to align with each department’s needs assessment.

The specific amount of continuation pay for each military branch is calculated using a multiplier applied to the service member’s basic pay. Here are the multiplier guidelines to consider:

• The multiplier varies depending on the service branch, rank, and specialty skill.

• Active-duty service members can receive a multiplier of 2.5 to 13 times their monthly basic pay.

• National Guard and Reserve members can receive a multiplier of 0.5 to 6 times their monthly basic pay (as if serving on active duty).

What to Do with Your Military Continuation Pay

Of course, the choice is yours for spending your continuation pay—but it should align with your current financial situation. Here are some options to consider:

Pay down debt. Do you owe money on credit cards, school loans, or another type of debt? Are you making more interest payments than you are saving or investing? If so, start paying down the debt that costs you the most interest.

Save it. If you already have an emergency or reserve fund in a savings or money market account, apply your continuation pay toward growing your savings for other goals.

Invest it. Are you hoping for a better, wealthier future? If so, you could invest your continuation pay.  Did you know that you can contribute your continuation pay to your TSP? Your smartest move is to talk to an investment professional before investing.

Spend it. Go on a vacation, buy that item you’ve been hoping for, or put a down payment on a home. But before you spend your continuation pay, confirm your savings goals are on track.

Gift it. You could gift some or all of your continuation pay or donate it to a qualified charity. You could potentially enjoy a tax deduction if you choose this option.

We’re Here to Guide You

The best way to determine if military continuation pay is the right option for your specific needs is to consult with a military financial planner. 

Our team at Clear Insight Wealth Management specializes in military financial planning strategies. As our founders are military spouses and small business owners themselves, we fully understand the challenges and opportunities you face, and how best to navigate them as you pursue your ideal financial future. 

To schedule a get-acquainted meeting, call (509) 847-4079 or email adrienne@myciwm.com.

About Adrienne

Adrienne Ross is a financial advisor and partner at Clear Insight Wealth Management, a wealth management firm for military families, government employees, and small business owners looking for a clear path to living their best lives. Adrienne is driven to help clients become more informed financial decision-makers and empower them to solve difficult (sometimes seemingly impossible) problems. She’s hooked on helping people improve all aspects of their financial lives, and there’s nothing else she would rather do.

Adrienne has over 15 years of experience serving military families. She obtained her bachelor’s degree from University of Illinois Springfield, and is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Financial Consultant®, and Accredited Financial Counselor®. She is one of the first financial professionals authorized to use the MQFP® marks as a military financial planner. In 2020, Adrienne was named the 2020 Financial Counselor of the Year by the AFCPE® in recognition of her service to military families. She is a 2010 FINRA Military Spouse Fellow and scholarship recipient through The Center for Military and Veterans Affairs.

A military spouse for more than 30 years, Adrienne is also a military mom and a military kid.  She splits her time between caring for her grandbabies during Space Force launches, visiting her mom on the ranch, and exploring the PNW with her retired Marine husband on her Triumph. In spite of her hectic schedule, Adrienne still takes time to mentor other military spouse AFC® counselors and AFC® candidates. She enjoys spending time helping young people (especially those aging out of the foster care system) build financial mastery. To learn more about Adrienne, connect with her on LinkedIn.