My Favorite Little Known Military Benefit: The Savings Deposit Program

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If you ever talk to me about investing in person, you’ll probably hear me say two things. The first is that investing is better than saving over the long term because savings accounts don’t keep up with inflation. This is why it’s important to overcome your fear of risk and just start investing. The second is that the long term average return of the S&P 500 is about 10%, but that you should assume a more conservative return on your own investments (7% or 8%) to account for ill-timed down markets and the fact that your portfolio probably will include bonds. You should not be planning your financial future on a 10% return. You definitely should not expect a guaranteed 10% return, and should run away from anybody who promises one.

The exception is the Savings Deposit Program, aka my favorite underappreciated and often unknown military benefit. The last time I talked about combat zones was when I discussed how deploying to a CZTE can affect your taxes. Another thing you need to know that will benefit your personal finances in a combat zone is how to utilize the Savings Deposit Program (SDP).

What is the Savings Deposit Program?

The SDP is a savings account set up by the Department of Defense specifically for deployed military members. You can deposit up to $10,000 during each deployment. That money will earn up to 10% annually, with the interest added quarterly. That’s a government-guaranteed 10% return, which is basically unheard of from a savings account. There is no risk involved, other than, ya know, being in a combat zone.

Additionally, you can keep earning interest on your SDP account for up to 90 days after you redeploy. This is a nice little bonus that makes the SDP even more valuable.

For some reason, the Savings Deposit Program isn’t very well known. I did a poll of my Facebook friends a few weeks ago, and of the respondents only 1 in 4 had ever heard of the SDP. Of the people I’ve deployed with, only a handful took advantage of the program. It’s one of the few no-strings-attached benefits the military offers, so spread the word!

How does the SDP work?

If you are serving in an SDP-eligible combat zone, you can start your SDP account once you’ve been deployed for a minimum of 30 consecutive days or at least one day in each of three consecutive months.

The military finance office at your deployed location will help you set up your account. They will also inform you of the local procedures for depositing money. Generally speaking, deposits can be made by cash, check, or through paycheck allotment. You do not have to put the same amount in each month. For instance, if you can only afford to put in $1,000 the first month but by month 3 you can put in $1,500 per month, that’s okay. You just need to remember the deposit limit of $10,000 per deployment.

Typically you will hear that your monthly contributions are limited to your “unalloted pay.” Unallotted pay is the amount you receive each month minus authorized deductions. Authorized deductions can include Thrift Savings Plan or Combined Federal Campaign contributions. I’ve also heard that officers are limited to the highest enlisted pay per month. As you’ll see below, my authorized maximum contributions don’t match either of these rules.

My experience with SDP deposits

I’ve been deployed three times, and the amount I was able to deposit per month into the SDP was calculated differently each time. I’m sure somewhere somebody had a complicated formula that determined how much I could put in each month, but it didn’t make sense to me then and it doesn’t now. If anybody from Finance wants to explain in the comments, I’m sure it would be appreciated!

• For my first deployment, I was allowed to deposit the entire $10,000 all at once.
• On my second deployment, I was allowed to deposit a little less than half the limit the first month. I was allowed to deposit the remainder the second month. I don’t know where these numbers came from. They don’t match any of the rules discussed above.
• On my third deployment, things got weirder. My first deposit was a few dollars more than my basic pay. My second deposit was limited to about half that, and my third deposit was just a few hundred dollars. Again, I have no idea where these numbers came from.

Who qualifies for the SDP?

Simply put, you qualify for the SDP if:

• You are an active duty, Guard, or reserve member deployed to an area where you receive Hostile Fire Pay or Imminent Danger Pay

– and –

• You serve in the combat zone or in direct support of the combat zone for more than 30 consecutive days

– or –

• You serve in the combat zone for at least one day each in three consecutive months. This criterion comes into play for those that may be stationed outside the combat zone but regularly enter it, such as aircrew or special operations.

You remain eligible for the length of your deployment. Your eligibility stops the day you redeploy to a non-combat zone. If you are deployed to a combat zone but are on TDY or R&R status outside the combat zone, you remain eligible. This occurred in two of my three deployments and didn’t affect my SDP eligibility at all.

Funding your Savings Deposit Program account

Even if you normally spend your entire paycheck, remember that your expenses will often go down during a deployment. Sometimes they go down considerably. For instance, every time I deploy I contact my cell phone provider and have them turn off my line. That has saved me up to $80 per month while deployed. That, and similar savings, could be used to fund your SDP.

If you are single and living alone, it’s even easier to save money. If you can move out of your residence while deployed, you can use the money you would be paying towards rent to fund your SDP. You can also use the money you normally spend on utilities, cable, and internet.

One thing to consider is to fund your SDP account using the money that isn’t going to taxes while you are deployed. That money normally isn’t part of your paycheck anyway, right? So you aren’t used to spending it. If you normally pay $500 per month in taxes, you could set up automatic deposits into the SDP for $500 instead and watch your money grow! That’s an easy way to fund your SDP without seeing any change in your paycheck.

You don’t have to deposit the full $10,000, you can deposit smaller amounts too. But I highly recommend you deposit as much as you safely can, because this is a deal you aren’t going to find pretty much anywhere else.

How do you get the money back?

In most cases, you are required to keep the money in the SDP until you redeploy. If you think there is a chance you will need the money before them, really think it through before using the SDP.

Your account will automatically be closed and the account balance returned to you via direct deposit after 120 days. Typically this goes to the same account your paycheck is deposited into. However, the money can be deposited in another account you identify or via hard copy check. Check with your deployed finance office if you want it to go somewhere else.

If you want to withdraw the money before the automatic 120 day closure, here are some guidelines:

• Once your account reaches a $10,000 balance, you may withdraw funds over $10,000. Since the balance over $10,000 isn’t earning interest, you could take that money out and add it to something that is earning interest, like a separate savings account or an investment account.
• Emergency withdrawal must be approved by your commanding officer. Your commander must determine that it is necessary for the health and welfare of you or your family. This is why you need to carefully analyze how much money you can put into the SDP before you make deposits.
• If you want your money before the 120 day period ends, myPay has an online request option for SDP participants. This is very easy to use and it’s how I’ve always gotten my money back. Once I see that last interest payment hit my account, I go into myPay and request the money be direct deposited into my checking account. Make sure you take advantage of the extra 90 day interest period, though! You don’t want to take the money out of the SDP before then unless you have to. Taking it out earlier is giving up free money.
• If you don’t want to request the money online, there are other methods. Send a request including your name, Social Security number, and date of departure from the combat zone:

• • • via e-mail to dfas.cleveland-oh.jfl.mbx.sdp-cle@mail.mil
    • via fax to (216) 522-5060 “Attention: SDP”
    • or by mail to DFAS-Cleveland Center (DFAS-CL), ATTN: SDP, Special Claims, 1240 East 9th St., Cleveland , OH 44199-2055

Note: this was pulled from the DFAS website on May 29, 2017. Check with your finance office to find out if there are any changes. For instance, the militarypay.defense.gov SDP site has a different email address listed. Because, of course it does.

Why I like the Savings Deposit Program so much

Did you see where I said it was a guaranteed 10% return annually, with no risk?? That’s just not something you are going to find elsewhere. Sure, there are lots of investments that can bring in 10% or more, but those come with a lot of risk. The SDP is zero risk. If you are risk adverse and you deploy to a combat zone, this is the program for you. If you aren’t risk adverse (like me) you should still be looking at the SDP because it’s the easiest 10% you will ever make. Seriously, it takes about an hour total of your time over a few months to earn hundreds of dollars. That’s a Return on Investment I’ll take any day.

Anything else?

The interest from the Savings Deposit Program is taxable, even if you earned it in a combat zone tax exclusion area. It would also be taxable if you left it in a savings accounts at home, though, so don’t let this discourage you from using the SDP.

Have you ever taken advantage of the Savings Deposit Program? How was your experience?