MCENTIRE JOINT NATIONAL GUARD BASE, S.C. -- Last month’s Shirt Blast focused on a few deployment benefits. Given some of the upcoming travel, I figured why not stay in this genre. This month we’ll hit on another one. It’s called the Savings Deposit Program or SDP. For the majority of those deployed, we tend to make more money deployed than at home. Knowing what options are available will help keep us from blowing it all and having nothing to show for it. Before we get started, a disclaimer:
Disclaimer: I AM NOT ADVOCATING FOR ANY PROGRAM. This article should not be the only information you read regarding the topic. If you have questions, consult a credible professional. Consider all options when it comes to your finances. Always beware of self-proclaimed “experts” especially if they’re selling something. Not everything on the internet is true, verify your sources.
Now, where were we? Ah yes, the SDP. This is quite a simple and clean program. The whole purpose is to provide military members a way to save while deployed. Here is how it works:
- After being in a combat zone for 30 consecutive days, you become eligible to go to any finance office in theater and create an account.
- Once the account is created, you can make deposits via cash, check, or allotment.
- Allotments cease following combat zone departure.
- You cannot close your account until you leave the combat zone unless one of a few conditions are met.
- Money will continue to grow for up to 90 days following your departure from the combat zone.
- Your account will automatically be closed and all funds will go to your pay account 120 days following your combat zone departure if you do not take action to close it through myPay.
- Interest on the account is 10 percent APY. Since it is compounded quarterly that equates to an APR of just under 9.65 percent.
- Interest earned IS NOT TAX-FREE.
Finding a calculator for this is a bit tricky since it depends on the point in the quarter you deposit money, the total amount deposited, and the point in the quarter you leave the combat zone. For most people that deploy, the maximum number of months they can earn interest is 8 (5 months of the deployment and 3 months following) which means money deposited at the earliest possible point will earn approximately a 7.5 percent yield. Thus, the max earned, based on a $10,000 deposit on the 31st day in theater, would be $750 minus taxes (for most of us that’s a 12-24 percent tax). This would yield $660.00 to $570.00 net. Again, this is an approximation of the maximum that can be earned. Actual yields will likely be lower. This is true if you are making deposits throughout the deployment versus a max deposit upfront.
So is it a good idea? It depends on YOU. The rest of this is just my opinion and should provoke thought rather than give a definitive answer. The real question isn’t whether it is a good idea, it's whether it is your best option for your situation. If you’re looking for a place to squirrel away funds that you can’t touch and still have access to at the end of your deployment, it’s a great option. The money will be waiting for you at the back end with a little interest thrown in for good measure. However, it is not a long-term solution by any means. It is designed specifically to be a short-term savings program. If you are looking for a long-term savings program and can afford to not have your hands on the cash for the long-term, you have more suitable options. For example, if you’re looking at retirement there are few options better than TSP (this opinion is based on growth, simplicity, risk, costs, and access). You can put the same money in and have it grow tax-free until you retire. If you’re looking at future cash flow options, you might look at using the same money to pay down debt, like credit cards or vehicles that have an APR higher than 9.65 percent. Without getting too deep into the math, it would yield the same or better positive cash flow gains; not by increased income, but by decreased spending.
The bottom line is, it depends on you and your needs. Now is the time to think about the financial situation you will be in while deployed. This is one of a few great options to discuss with a credible financial resource you trust.
Hopefully, this helped shed a little light on the SDP. Please share this topic with your peers, supervisors, and subordinates, you never know who it could help. Thanks for your time and all you do!
REFERENCES:
SDP General Info: https://www.dfas.mil/militarymembers/payentitlements/sdp.html
SDP Tax in: http://www.military.com/money/personal-finance/banking-and-savings/savings-deposit-program.html
Tax Brackets: https://taxfoundation.org/2019-tax-brackets
SDP Tax liability: http://www.military.com/money/personal-finance/banking-and-savings/savings-deposit-program.html
Common Sense Commentary: https://themilitarywallet.com/military-savings-deposit-program-sdp/