There are many ways to save money as a member of the U.S. military. This includes savings bonds, allotments, and interest-bearing savings accounts.
The savings account is one of the best-known ways to build a nest egg and prepare for the future. But the chief complaint about savings accounts is the interest rate which according to some reports can be as low as .08% nationally. And so called high-yield accounts offer rates around two percent.
Compare that to the interest rates you will pay on a mortgage loan. A conventional 30-year fixed rate mortgage can feature rates at or near five percent (at the time of this writing). And that isn’t the rate offered to someone with marginal FICO scores or with a spotty credit history. The most financially well-qualified borrowers are the ones being offered an interest rate at more than double the rate of a high-yield savings account.
How does a service member get ahead with circumstances like these? For some, the answer lies in something called the Savings Deposit Program or SDP for short. SDP is not intended for all service members. Those who serve in combat or in hazardous areas may qualify if they have served a minimum time on duty drawing hostile fire pay.
For those who qualify, this is an important (though temporary) financial benefit.
SDP is so appealing because of the comparatively higher interest rate on the savings account (see below) and the ability to earn interest on as much as $10,000 dollars saved per deployment.
The Savings Deposit Plan: Who Can Use It and When
The Savings Deposit Plan (SDP) is unfortunately not available to all service members. It’s offered to those serving in designated combat zones, certain hazardous duty locations, and approved contingency operations for a minimum of 30 consecutive days, or one day in each of three consecutive months according to the Defense Department.
Sign-Ups Are Required for SDP
SDP is not automatic and requires the service member to enroll to have amounts deposited into an SDP account up to a limit of $10,000 total. Military members are required to draw hostile fire pay to participate.
The Savings Deposit Plan is basically a benefit for those sent to combat zones or who serve the required minimum amount of time in a hazardous deployment situation.
How the Savings Deposit Plan Works
The Savings Deposit Plan allows qualifying service members to contribute up to $10,000 per deployment into a special, non-permanent savings account that accrues 10% interest annually.
This account may not be closed until the service member has departed the combat zone. Once the account is closed, funds are returned to the military member 120 days later.
Those who qualify for this program can sign-up by calling the base finance office to create an allotment to be paid into the SDP program. This may be done on the service member’s behalf with a power of attorney if the spouse or family member helping out is specifically authorized . This additionally can be done with the broader general power of attorney that gives blanket authorization to the bearer.
When SDP Allotments Begin
Allotments will begin 31 days into your deployment. That is described as the only time the service member or family may initiate them, but deposits can be cancelled at any time.
Savings Deposit Plan Allotment Deposit Limits
The amount of your deposit cannot be more than the amount of money you would receive in your monthly pay, minus deductions. SDP deposits are required to be in amounts divisible by five. You are permitted to deposit a maximum of $10,000 per deployment.
Why would military members choose to have the entire amount of monthly pay deposited? For some, reaching the SDP program limit of $10,000 per deployment in the account as early as possible is the goal. The longer your $10,000 earns 10% interest for the duration of the deployment, the better.
Others can’t commit to the entire monthly pay amount because of family commitments, bills, or other obligations. But putting as much aside as possible to get to the “magic number” of $10,000 is a goal that makes sense in terms of taking advantage of the high interest rate on SDP accounts.
When You Can Make SDP Withdrawals
SDP accounts may be closed when the service member leaves the combat zone or other qualifying duty. Those who choose not to close their accounts immediately should know that interest will continue on these SDP accounts for up to 90 days after leaving the combat zone. When the SDP account reaches a $10,000 balance, funds over $10,000 can be withdrawn on a quarterly basis.
The Defense Department official site for this program advises that withdrawals of funds on deposit “may be made in an emergency only when the health or welfare of a member or dependents would be jeopardized if the withdrawal were not granted. Emergency withdrawals must be authorized by the members’ commanding officer.”
SDP withdrawals, emergency or otherwise, can be arranged via MyPay, or by mail, fax, or e-mail (see below).
Important Things to Remember About Withdrawals from The Savings Deposit Plan
- When your SDP account is closed at the end of your deployment, all funds will be scheduled to be sent direct deposit 120 days after leaving the combat zone.
- If you need your funds returned to you before the 120-day period ends, your myPay account provides an automated request option for Savings Deposit Program participants.
- Emergency withdrawal approval by your commanding officer includes a requirement for the commander to determine that it is “necessary for the health and welfare of you or your family.”
- You can send a withdrawal request including your name, SSN, and date of departure from the combat zone by email: [email protected]
- You can submit a request by fax to (216) 522-5060 “Attention: SDP.”
- Withdrawal requests can be made by mail to DFAS-Cleveland Center (DFAS-CL), ATTN: SDP, Special Claims, 1240 East 9th St., Cleveland, OH 44199-2055.
Funds can be sent to the direct deposit account on record. Service members are permitted to request a deposit in a different account if the service member submits a request with the name of the financial institution plus all routing and account numbers required to make the transfer.
Learn more, sign up, or get assistance with an existing Savings Deposit Plan account by calling 1-888-332-7411 or commercial 216-522-5096 and DSN 580-5096.
|Money & Finance||Military Benefits at Glance|
|Thrift Savings Plan||Using eBenefits Online|
|TSP Contribution Limits||Additional Military Compensation|