Updated January 2022.
For most people, saving money isn't exciting. It's no fun giving up money you want to spend. But doing it benefits you in the long run. Combat deployments provide a significant opportunity to save. You're getting paid extra, so why not save it? A program exists to help you save the extra cash you earn while deployed. It’s called the Savings Deposit Program, or SDP.
The Savings Deposit Program is a Department of Defense (DoD) initiative established to allow members of the military serving in a combat zone to build up their savings. If you’re looking to enhance your personal savings, you might consider leveraging your extra deployment money for a higher return. This is where the SDP can help.
What is the Savings Deposit Program?
The Savings Deposit Program is a benefit that allows deployed service members to save money and earn an annual return of up to 10%.1 And the interest compounds quarterly.
Members of the armed forces actively serving in a qualified combat zone are eligible to use the SDP. It is also available to Guard and reserve members on active-duty orders and serving in a designated combat zone. The Defense Finance and Accounting Service (DFAS) lists those designated combat zones on their website.2
How To Start The Military Savings Deposit Program
To begin using the SDP, you must first be in an eligible combat zone for at least 30 days or at least one day for three months in a row. During this time, the finance officer at your deployment location can initiate an SDP account for you. You can fund the account by setting up a monthly allotment, using cash, or depositing a check.
You can save up to your total allotment for the month. This includes your base pay plus bonuses, excluding payments you make towards the Thrift Savings Plan (TSP) or other allotments from your pay.
For example, if your base pay is $3,000 per month and you have no allotments, you can deposit the entire $3,000 into your SDP account. If you're an O6 making $10,000 in base pay, you can front-load your SDP by depositing the entire $10,000 once you meet the 30-day rule. But you won't be able to allot (or save) any more than the $10,000 SDP savings limit.
You have until the day you leave your combat zone assignment to establish an SDP account. Once you sign up for the program, you will be able to monitor your savings through your MyPay account. You will also be able to track your monthly allotments to the account on your Leave and Earnings Statement.
The savings program continues for the length of your temporary duty in a combat zone and your account will continue to earn interest for an additional 90 days after you leave your deployment area.
How to Stop the Savings Deposit Program
If you're making monthly or bimonthly allotments to your SDP, you can stop adding to the account at any point during your deployment. But you cannot close your account until after your deployment ends. Your monthly SDP allotments will stop once you leave your combat zone location.
If you were depositing by cash or check, you would no longer be able to make deposits to your account once you leave the combat theatre. The SDP automatically ends 120 days after you return from your combat zone.
At the end of the 120 days, your SDP savings will be directly deposited into the bank account you have designated for your regular military pay, unless you direct them to a different account. Although the SDP continues for 120 days after your return, the account will only earn interest for 90 days after deployment ends.
If you want the money before the 120-days are up, you can submit a request in your MyPay account. Your money is then transferred to the DFAS account you have on file for direct deposit.
Savings Deposit Program Withdrawals
The SDP is not intended to be a demand deposit (or checking) account. The purpose of the program is to help you build up your savings, not to spend the windfall.
Still, things don’t always go as planned. Life doesn't always give you warnings. If you find yourself in a financial emergency and need to withdraw money, you must have your commander's approval. Your commander is the deciding authority on whether your request is an actual emergency. If he or she concludes it is, then you will be able to make an early withdrawal from the account.
Making the SDP Savings Decision
Taking advantage of the SDP is a guaranteed way to save money and earn a very lucrative 10% return. If you aren't sure what to do with your extra combat pay, the SDP is a fantastic tool to save money and earn a higher rate of return than you would in a civilian financial institution.
Still, there are a few factors to consider.
1) An SDP isn't easy to set-up. It may not come as a shock to those serving, but establishing an SDP account involves paperwork. DFAS and the DoD don’t have online capability. So, you must contact your financial assistance officer in the deployment theatre to get the necessary forms.
2) You are limited to $10,000 for the entire deployment, and you can only deposit your base pay and bonuses. For low-ranking service members, it could take the entire deployment to reach the allowed account maximum.
3) Taxes will cut into your returns. Even though your combat zone income isn't taxable, the earnings on your SDP interest is.
Deciding to establish a Savings Deposit Program account is a personal decision. You should consider your entire financial situation. The program is intended to help you build up your savings while serving in a combat zone.
Review your financial goals to see how the SDP might fit in to your overall retirement plan. Using the SDP can be a great way to save your extra income from a combat deployment and help set you up for future financial success upon return.
For information about other investment opportunities outside the SDP, contact a Member Service Representative. Visit our Member website to get a personalized investment recommendation that shows you show much you can invest each month.
1Defense Finance and Accounting Service, Savings Deposit Program
2Defense Finance and Accounting Service, Designated Combat Zones