Awesome Military Savings Program Guarantees 10%
If you or a loved one is in the military and is or is about to be deployed to a hazardous duty zone, there’s a great federal program that gives you a guaranteed 10% interest on savings up to $10,000. It’s a great program I learned about recently offered by the military called the Savings Deposit Program (SDP).
Savings Deposit Program
Not to be confused with the Thrift Savings Program (TSP), the Savings Deposit Program is an awesome way for deployed military members to earn a great, guaranteed return on their savings. By participating in the SDP, you are guaranteed to earn 10%, compounded quarterly, for as long as you’re deployed in a combat zone. 10% Guaranteed! That’s phenomenal. It would be a very respectable return in any environment, but with interest rates as low as their are right now and the volatility in the stock market, this is practically unbeatable.
The SDP has several key eligibility requirements:
- You must be an officer or enlisted member of any U.S. military service
- You must be deployed to a ‘hazardous duty zone’ for the period of time you participate in the program
- You must be in that combat zone for at least 30 consecutive days or one day in each of three consecutive months
Key things to know about SDP
Besides the stringent eligibility requirements (it sucks to be in a combat zone), there are a few key points about the program to be aware of.
- To participate in the SDP, you submit your deposit through your pay office either in cash or check, or you can set up an allotment out of your LES. Obviously it’s to your advantage to deposit as much money as you can right at the start of eligibility since it gives you the most opportunity to earn the 10% interest.
- You’re limited to a $10,000 deposit in the program. You can actually deposit more, but since anything over $10,000 doesn’t accrue interest, why would you? This might be important to note if you participate by allotment. Once you reach $10,000, you should stop the allotment.
- You can’t withdraw your deposit until after you redeploy except in extreme circumstances. Don’t put in any money you might need before you get back. On the other hand, your spouse can’t get at the money either, so that might be an advantage to some people.
- You can actually leave your deposit in the plan for 90 days after you return and it keeps earning interest. After that, it stops earning anything, so you should close out the account. Again, you could leave your money there, by why would you?
- Though your pay in a combat zone is free from federal tax, the interest earned in this program is not.
The Savings Deposit Program is simply a great benefit to the generally cruddy situation of being deployed to a combat zone. I highly recommend looking in to it if you or a loved one is about to be deployed.
Links of interest:
DFAS homepage
SDP information pamphlet
February 6th, 2008 at 1:06 pm
couple of clarifications:
1. You must submit termination from SDP upon deployment. You can maintain funds for 90 days (i.e. 1 quarter’s worth of interest) from the date of redeployment.
2. You CAN withdraw anything over $10k. This means that any interest accrued over the $10k limit is available for withdrawal; however, you can only make withdrawals once a quarter.
3. Interest is compounded quarterly for amounts less than $10k. However, if you have $10k in, interest is compounded monthly (i.e. you get paid interest each month rather than each quarter). Although you will not earn interest on anything over $10k, it shouldn’t really matter about the monthly versus quarterly; however, it is a special difference. Please note that it is 10%APY, not 10% each quarter. If you have $10k, this amounts to $83.33 (or $83.34 for 31-day months) of interest every month.
4. Since you don’t earn anything over $10k, it is worth it to withdraw the amount over $10k each quarter. You can do this through mypay website. Essentially this means that you will get to withdraw $250 every quarter in interest off of $10k. Not a bad chunk of change that you can continue to earn interest or appreciation investing elsewhere.
5. You can participate if you are in a tax exclusion zone. I say this, because some things like bosnia weren’t necessarily combat vice iraq/afghanistan. so long as you are in tax exclusion zone and getting HFP/IDP, you are good to go.
6. Withdrawal requests of your deposited amount has to be done through the chain of command, but it isn’t necessarily “extreme” situations although the requirement is for “health and welfare” of the soldier and dependents. That gives a great deal of latitude for commanders to work with in allowing for withdrawals prior to eligibility termination. Which means, it is a great place to stash away an emergency fund. Withdrawals are EFT’d in about a week.
February 6th, 2008 at 1:19 pm
Good stuff, Tim. Thanks.
Some of what you point out, I knew and left out for brevity. Someone considering participating should contact their pay office for full details.
February 10th, 2008 at 11:01 am
[…] Awesome Military Program Guarantees 10% I have the utmost respect for our military personnel, so if you know anyone that can benefit from a savings account that guarantees 10% interest, please let them know. This sounds like an amazing program. 10% guaranteed, you won’t see that advertised by banks any time soon. […]
February 16th, 2008 at 10:59 pm
My wife and I both took advantage of this program during our deployments to the Middle East. I convinced several of my troops to take part as well. This is quite honestly the only place I know where you can get such a high rate of return that is guaranteed.
Tim, great additional info!
February 17th, 2008 at 4:24 pm
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February 20th, 2008 at 10:01 pm
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February 25th, 2008 at 7:28 pm
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May 13th, 2008 at 8:14 am
I was looking all over for this information, but you brought it all to me. Thanks!