Military Investments: Savings Deposit Program
A little known program called the Savings Deposit Program (SDP), which was created during the Vietnam War, allows military members in combat zones to earn a guaranteed 10% APR on deposits up to $10,000. The U.S. Military defines a service member eligible for SDP if they are on orders to an area that receives hostile fire pay and also considered a combat zone. Once a member has been in the combat zone for 31 days or at least one day in each of three consecutive months, they can start depositing money into their SDP amount. This can be in person at your base's finance office using cash, money order or check. You can also setup allotment withdrawals from your bi-monthly paycheck to deposit funds by using myPay.gov. If you are like me, at a tiny FOB without a finance office, then the allotment option is really your only option. If that's the case, your SDP must be setup in person prior to your first deposit. More often than not, you will stop at a large FOB with a finance office before heading to your final FOB. Take care of the paperwork there or and I'm not entirely sure this is possible but see if your home station can get it started before you leave.
There is a restriction on how much you can add at any given time. You cannot deposit more than your base pay minus current allotments. So it may be take awhile to hit the $10,000 for lower ranking guys. To keep things €somewhat€ equal, officers are limited to the highest enlisted base pay or their base pay if it's lower. Interest only builds on $10,000 or less though you can withdraw any interest returns over $10,000 every quarter. Here's the catch, once you put money into your SDP, you cannot withdrawal it until you leave the combat zone for good. Short of convincing your Commanding Officer that you or your family is in dire financial straits without this money, it's staying put. This is why you need to put a lot of thought and time into deciding how much you can comfortably deposit each month. Having a minimum of a three to six month cash reserve in a separate account that's easily accessible is a good idea if you plan on using the SDP. Having $10,000 locked up in the SDP isn't going to help you if you find yourself needing cash for an unexpected bill or something of that nature. This is just something you need to consider and decide for yourself.
Now that the funding part is covered let's go over the rest. You can contribute to your SDP account for every month after your 31st day in country until the day you leave the combat zone. Once you leave the combat zone, you can no longer make deposits though your account will still accrue interest for more 90 days. You could take it out as soon as you leave but why not get another quarter of interest? There's no time limit on how long you can leave your funds in the SDP account after those 90 days but again, it will not be accruing interest after the 91st day of leaving the combat zone. Withdrawals can be requested in person at your finance office or on myPay.gov. It will take a few days to process and there's multiple ways of receiving the funds. I'd say just use myPay.gov since it's already linked to your direct deposit account for pay. After 120 days from your departure from a combat zone, your SDP account will automatically be closed and direct deposited to your default myPay linked bank account.
Unfortunately, let's cover some downsides to the SDP. As with most investments, the earned interest from your SDP is taxable and must be claimed on your annual taxes. Anytime you mess with your military pay system, you run the chance of it getting really screwed up. I'm not saying it will happen but anyone in the military has definitely seen examples of it in their careers. It's not a bad idea to print out information on the program since its not uncommon for some finance personnel to be unfamiliar with the program's specifics. Finally as I stated before, make sure you can afford the allotments you add to your paycheck. Once the money is in your SDP, you cannot withdrawal it until you head home. Don't leave yourself stretch thin trying to make a little bit more on the interest.
SDP is not everyone but you'll be hard pressed to find a guaranteed 10% return elsewhere. Weigh the pros/cons and see if it fits your financial goals.
The official DFAS SDP website which oddly enough lacks a lot of information on the program - http://www.dfas.mil/militarymembers/payentitlements/sdp.html
There is a restriction on how much you can add at any given time. You cannot deposit more than your base pay minus current allotments. So it may be take awhile to hit the $10,000 for lower ranking guys. To keep things €somewhat€ equal, officers are limited to the highest enlisted base pay or their base pay if it's lower. Interest only builds on $10,000 or less though you can withdraw any interest returns over $10,000 every quarter. Here's the catch, once you put money into your SDP, you cannot withdrawal it until you leave the combat zone for good. Short of convincing your Commanding Officer that you or your family is in dire financial straits without this money, it's staying put. This is why you need to put a lot of thought and time into deciding how much you can comfortably deposit each month. Having a minimum of a three to six month cash reserve in a separate account that's easily accessible is a good idea if you plan on using the SDP. Having $10,000 locked up in the SDP isn't going to help you if you find yourself needing cash for an unexpected bill or something of that nature. This is just something you need to consider and decide for yourself.
Now that the funding part is covered let's go over the rest. You can contribute to your SDP account for every month after your 31st day in country until the day you leave the combat zone. Once you leave the combat zone, you can no longer make deposits though your account will still accrue interest for more 90 days. You could take it out as soon as you leave but why not get another quarter of interest? There's no time limit on how long you can leave your funds in the SDP account after those 90 days but again, it will not be accruing interest after the 91st day of leaving the combat zone. Withdrawals can be requested in person at your finance office or on myPay.gov. It will take a few days to process and there's multiple ways of receiving the funds. I'd say just use myPay.gov since it's already linked to your direct deposit account for pay. After 120 days from your departure from a combat zone, your SDP account will automatically be closed and direct deposited to your default myPay linked bank account.
Unfortunately, let's cover some downsides to the SDP. As with most investments, the earned interest from your SDP is taxable and must be claimed on your annual taxes. Anytime you mess with your military pay system, you run the chance of it getting really screwed up. I'm not saying it will happen but anyone in the military has definitely seen examples of it in their careers. It's not a bad idea to print out information on the program since its not uncommon for some finance personnel to be unfamiliar with the program's specifics. Finally as I stated before, make sure you can afford the allotments you add to your paycheck. Once the money is in your SDP, you cannot withdrawal it until you head home. Don't leave yourself stretch thin trying to make a little bit more on the interest.
SDP is not everyone but you'll be hard pressed to find a guaranteed 10% return elsewhere. Weigh the pros/cons and see if it fits your financial goals.
The official DFAS SDP website which oddly enough lacks a lot of information on the program - http://www.dfas.mil/militarymembers/payentitlements/sdp.html
