Get Started

Congratulations! You have reached an important milestone in your military journey — the point where your spouse is approaching eligibility for continuation pay.

Continuation Pay Is Part of the Military's Blended Retirement System (BRS)

Financial Planning

Use this webpage to help you reassess  your career goals and make important personal financial decisions as they pertain to continuation pay.

Financial Planning Considerations

Resources

Learn about the resources available within the military community. There are sources of support and information available online and at each installation.

Know What's Available

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses

1

Getting Started

Continuation Pay (CP) is part of the military’s Blended Retirement System (BRS). It is a one-time direct cash payout to service members who have completed at least eight but not more than 12 years of service.

The objective of continuation pay is to offer midcareer service members a financial incentive to remain in their service in exchange for committing to at least four more years. Time of service is calculated from the service member’s pay entry base date (PEBD).

How much is continuation pay? It depends. Each service establishes its own criteria for when a service member is eligible to receive continuation pay and the amount they will receive. Factors, such as a critical skill set, training experience, or needs of the service may result in a higher multiplier for continuation pay. The amount can range from 2.5 to 13 times basic monthly pay for active component Service members (including Active Guard Reserve (AGR) and Full Time Support (FTS). Reserve Component members could be eligible for .5 to 6 times monthly basic pay (as if serving on active duty). Rates for 2020 can be found here. Please note, continuation pay is its own distinct category and does not impact other types of special pay.

Continuation Pay - Soldiers saluting

The Goal

The BRS blends a traditional military retirement pension, with a 401(k)-style retirement account called the Thrift Savings Plan (TSP).

  • The retirement pension is typically earned after completing at least 20 years of service.
  • The TSP is a tax-advantaged retirement account for Service members. Under the BRS, Service members who contribute at least 5% of their basic pay into the TSP, will receive 5% in automatic and matching contributions after serving two years.
Continuation pay - Marines marching

Continuation Pay

As a component of the BRS, continuation pay is another part of the benefits package offered to the Service member that may be similar to a retention bonus awarded to someone in the civilian sector.

2

Financial Planning Considerations

cash payout can have a very positive impact on your family’s financial security. Here are some tips to help your family plan and make the most of this benefit.

There are many good ways to use your continuation pay, but how can you make the most of this opportunity? One great place to start is by assessing your current financial situation. Speak with your spouse about your financial goals and update your family spending plan. If you need help with goal setting or budgeting, visit the Getting Started and Money 101: Create a Budget sections for guidance. 

Once you have prioritized your financial goals and know where your money is going, you will have a better understanding of how to best use your continuation pay.

Do you have credit card debt, a student loan, car payment, or other loan? Consider using continuation pay to get rid of debt. We suggest using one of the following strategies: the snowball method or the avalanche method. In the snowball method, you rank your debts from smallest balance to largest balance. Concentrate your efforts on paying off the smallest balance debt first, while making minimum payments on the other debts. When the smallest balance debt is paid off, concentrate your efforts on the next lowest balance until your are debt free. Use our online calculator below to assess your financial situation using the snowball method.

 

Continuation Pay - Snowball Debt Calculator

Open Snowball Calculator

 

The second strategy, known as the avalanche or debt roll-down method, works in a similar fashion. Rank your debts from the highest to lowest interest rate. Concentrate your efforts on paying off the highest interest rate first. When it's paid off, apply those resources to the next highest interest rate balance until you are debt free. Click here and scroll down to Managing Debt 101 to see our videos. In addition, this calculator can help you decide whether the avalanche strategy works best for your financial situation. 

 

Open Avalanche Calculator

 

Unexpected events happen to all of us, but we can be prepared financially. Experts suggest you have three to six months of living expenses saved in a readily available account like a money market or savings account. Read more about emergency funds in this blog.

What percentage is your spouse currently putting in? Contribute at least 5% to take full advantage of the matching contribution. The IRS limits how much a participant and employer can contribute to retirement accounts, so be careful not to overfund the TSP early in the year, or you could miss out on matching contributions. The IRS limits participant contributions (called the elective deferral limit) to $19,500 for 2020 with a $6,500 catch-up provision if you are over the age of 50. The limit for total contributions, which includes employer matching contributions, is $57,000. Visit the TSP website for more information.

Continuation pay is considered earned income and is taxable at ordinary income tax rates. It can be received in one lump sum or as series of equal installment payments, not to exceed four annual payments occurring over four consecutive years. It may be smart to take it over a few years if you are concerned that the bonus could push you into a higher tax bracket. Each person’s situation is unique, so discuss this with a tax professional.

You can contribute proceeds from your continuation pay to your Traditional or Roth Individual Retirement Account (IRA), if eligible. You are limited to contributing $6,000 for 2020 with an additional $1,000 catch-up if you are over 50. Remember, a contribution can be made to a spouse’s IRA if you file a joint tax return. There are phase-out limits for IRA contributions. Check with your installation’s personal financial counselor for more information.

You may be eligible for a tax deduction if you donate your continuation pay. Be sure to factor in all of your goals as you consider this option.

Recognize and protect your family from misleading consumer practices and identity theft. Scammers and unscrupulous businesses prey upon consumers, including Service members with large sums of money to invest. Be careful. Protect your family’s personal information and do your homework before investing or doing business with any person or organization.

Important note: What happens if your spouse receives continuation pay and does not serve the required years of service? All or a portion of continuation pay may need to be repaid depending on why the commitment was not fulfilled.

For a quick reference guide for continuation pay, download this handout.

Reserve and National Guard Service members are eligible for continuation pay. The bonus amount can be from 0.5 to six times monthly basic pay, and the multiplier used is at the discretion of their service.

In summary, plan for the best way to use continuation pay. Every family’s situation is unique with different needs and goals. This one-time cash payment can help you meet your financial goals now and in the future.

3

Resources

Accredited and trusted by the military community, here are some excellent resources to get you started:

Money Ready 101: Create a Budget & Manage Debt

Continuation Pay Rates 2020: Click Here

Blended Retirement System: Click Here

BRS Continuation Pay Fact Sheet: Click Here

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses

Recent Blogs

Reduce Strain on Your Family Spending Plan

October 13, 2020

Tips to Stretch Your Spending Plan This Fall You may have noticed the days are getting a little shorter, and there’s a crispness to the air. Fall is officially here! Under normal circumstances, military families often welcome the change in seasons, as they settle into school and extra-curricular activities. But this year is anything but…

Read More

What You Need to Know About the Payroll Tax Deferral

September 22, 2020

Payroll Tax Deferral Military spouses, have you heard? To help provide relief during the COVID-19 pandemic, the Presidential Memorandum issued on August 8, 2020 temporarily defers Social Security — Old Age, Survivors, and Disability Insurance (OASDI) — tax withholdings for some Service members. This is known as the payroll tax deferral. What Does This Mean…

Read More

5 Tips for Avoiding Employment Scams

July 8, 2020

Beware of Employment Scams While this year’s permanent change of station (PCS) season is off to a slow, uncertain start, it is beginning to take shape. These moves will transplant military families around the country and even the world. As a result, many military spouses may be looking for jobs in a challenging job market.…

Read More

How to Protect Your Personal Finances Now

April 20, 2020

The COVID-19 pandemic sweeping the country and world is having a dramatic impact on how we live our lives and function within our communities. Many of us are affected by school and work closures and possibly even stay-at-home orders. Military families may also face additional uncertainty with the Stop Movement order impacting future assignments and…

Read More

2019 Tax Prep: Back to Basics

March 23, 2020

It’s tax time again. And while the federal income tax filing deadline for 2019 has been extended to July 15, 2020, that date will be here before you know it. Whether you’re preparing your own taxes or seeking professional assistance, here’s some guidance on what documents you need and where to get additional support to…

Read More

Staying on Track with Your Financial Goals

February 4, 2020

You Can Do It! Stay on Track with Your Financial Goals Did you set any financial goals or resolutions for the new year? If so, the end of each month is the perfect time to see if you’re staying on track with your financial goals. Set SMART goals Hopefully, you set goals that were SMART:…

Read More

Start the New Year Right, Set Financial Goals

December 17, 2019

As 2019 draws to a close, many of us are looking toward the new year with big plans and aspirations. Carry this excitement over to your finances, too! Set financial goals in the new year to build a stronger financial future for you and your family. The previous year is history. You cannot go back…

Read More

Tackle Unexpected Expenses with an Emergency Fund and Help from Relief Societies

October 28, 2019

One of life’s certainties is that it is uncertain, right? Life can throw a curveball in the form of a lost job, vehicle or home repair, health costs, or emergency travel, just to name a few. When these events occur, they can create havoc for a family’s financial stability. However, planning ahead and being familiar…

Read More
Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses