Did you know you could be entitled to a career incentive bonus not related to a re-enlistment bonus? Most members are eligible for Continuation Pay, a one-time, mid-career bonus authorized for Coast Guard members enrolled in the Blended Retirement System (BRS) in exchange for four years additional service. Members can elect to receive the bonus in a lump sum or spread the bonus out in equal payments over a two- or four-year period.
There is a catch! Members must elect to receive Continuation Pay prior to completing their 12th year of service using the Continuation Pay Election Form. This is why financial readiness training is an essential part of the Continuation Pay election process.
“Spider Man might say, ‘With a great sum of money, comes great responsibility!’ I don’t disagree,” quips Base Seattle Personal Financial Manager (PFM) Angela LeMaster. “When members reach the point of eligibility for Entitlement to Continuation Pay, it is a perfect time to sit down and review financial goals. There are some very important points to understand and consider, such as eligibility, timelines, taxes, and ways to maximize this financial boost. This is a great opportunity for members to use available resources and meet with a unit Command Financial Specialist (CFS) or the District PFM.”
Of course, the idea of receiving a large lump sum of money sounds exciting, LeMaster notes. We tend to create grand plans in our heads for the cash, but in reality, we tend to chip away at the funds and wonder where the money went. We can avert this by developing a realistic plan. It is important to develop SMART goals (specific, measureable, achievable, relevant, time-based) focused on your personal situation. Some manage a cash windfall or bonus by paying down debt first, boosting an emergency fund (three to six months worth of expenses), investing or funding a retirement plan, and resisting the urge to splurge. Another option LeMaster shares, “I recommend a past-present-future planning format for lump sums. For example, you might apply 40% of the lump sum to the past by paying off old debts, 30% of the lump sum to the present use by celebrating your hard work, and 30% of the lump sum to the future by putting money into an investment account.” There is no “one size fits all” approach on how best to use a bonus.
To create a financial plan in anticipation of receiving Continuation Pay, start with tracking all your income and spending for the next 30 days. It’s recommended that you save and/or invest 10%-15% of pretax pay; keep transportation expenses to 15%-20%; and limit housing expenses to what you receive for basic allowance for housing (BAH) or 25%-30%. Put together a plan to set aside money and limit how much you spend each month, although this plan can and must change as your life changes.
Celebrate your hard work and seize this opportunity by learning more from the Personal Financial Management Program’s Touchpoint Training, and then individualize your plan by meeting with the CFS or PFM. For more information on Continuation Pay click here. To complete the mandated Financial Readiness Training, log into the Coast Guard Learning Management System (LMS) portal. Your nearest Personal Financial Manager (PFM) is located in your closest Health, Safety, and Work-Life Regional Practice (HSWL-RP) office, or visit your unit’s Command Financial Specialist (CFS).
In the news:
- Continuation Pay FAQs
- Introduction to Financial Touchpoint Curriculum ALCOAST 104/22
- Coast Guard Handout-Entitlement to Continuation Pay.pdf (usalearning.gov)