Savings Deposit Program

Have you heard of the Department of Defense Savings Deposit Program (SDP)?  This high-yield savings account is a benefit of serving in areas that authorize the receipt of Hostile Fire/Imminent Danger Pay.  Want to know more?

Eligibility:  Service members (including National Guard and Reserve members) receiving Hostile Fire Pay and deployed for at least 30 consecutive days (or 1 days in each of three consecutive months) are authorized to make deposits into a SDP account.

Deposits:  Service members may begin making deposits on their 31st consecutive day in designated area.  Deposits can be made via allotment, check or cash.  Cash and check deposits are made to the finance office in your deployed location.  Deposits are accepted in $5.00 increments, with a minimum deposit of $5.00.  If you are depositing via allotment, be sure to stop the allotment when you leave the combat zone and before requesting a withdrawal.

Interest:  Interest is computed at 10% per year – much higher than any other savings product I can find.  It is compounded quarterly.  Deposits made during the first 10 days of the month will accrue interest from the first of the month.  Deposits made after the 10th will begin accruing interest on the first day of the following month.  Basically, the money must be in the account the entire month to earn interest for that month (except for the 10 days grace period for making deposits at the beginning of the month.)  Interest will only be earned on total deposits up to $10,000, and that $10,000 includes any accrued interest. The interest accrued is taxable even though the money deposited into the account is not taxable – that can be a little confusing if you don’t know.

Withdrawals:  You may only close your SDP account after departing the combat zone.  Interest will continue to accrue up to 90 days after losing eligibility, ending on the first day of the month during which you have been out of a combat zone for 90 days.  You do not have to remove the money from the account when you leave a combat zone, but it will stop earning interest on the first day of the month during which you have been out of the combat zone for 90 days.  SDP allotments must be stopped prior to requesting a withdrawal.  Withdrawals typically take between 10-14 business days to process.  There is a provision for emergency withdrawals, if the health or welfare of the service member or dependents is endangered.

From these details, you can see that it sounds like an excellent program.  A service member serving in a Hostile Fire area who deposited their $225 in Hostile Fire Pay into the account for 12 months would earn $150 in interest during the twelve months they were deployed, and another $50 in interest during the next two months post deployment.  Here’s the chart (and please, feel free to double check my math):

Just imagine if you could save more than just your Hostile Fire Pay, or if you could deposit a small chunk into the account at the beginning of your eligible time.  What if you had $2500 in a savings account and deposited that into a SDP account during your first eligible month, and still deposited your Hostile Fire Pay?  During that one year, you would earn $412 in interest, plus another $95 during the two post deployment months.  In contrast, money kept in my current emergency fund would earn approximately $25 in interest during the same period of time.  That is almost $500 difference!

Is it as good as it seems?  As always, there is no clear cut answer to that question.  With other current investment options paying such low rates, it seems like a good choice for many people.  I have heard criticisms about the interest payment and compounding schedule, but I’m not sure they are enough to make it a bad deal.  Another suggestion is putting the same money into your TSP account instead.  It probably won’t grow as much, but it will tax-deferred and it will really give your retirement account a big boost.

I am anxious to hear your experiences and thoughts about this program.  My husband is considering participating when he deploys next year and we want to learn as much as possible!

Here’s a link to the current Savings Deposit Program brochure.  This brochure is put out by the Wounded Warrior pay department, but it contains all the correct information on the program.  Here is a link to a audio file talking about the SDP.  This audio program is provided by Argonne Credit Union, and it can be downloaded if this isn’t a good time to listen.

So please, comment freely and help us all learn more!

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • David Johnson

    I used this program while in Afghanistan and it is wonderful. I am a reservist so I have a civilian job who gives me a 401k. Curently my 401k is at -11% eventhough it is well diversified so that should explain my emotion on the subject. I was able to get it to 10k about half way through so it worked out great.

  • andrew smith

    I am doing the Savings Deposit Program right now. The 10% is not entirely accurate.

    Full Breakdown: After 30 days in a combat zone you can begin to set up and contribute up to your entire paycheck to the SDP account. You will then earn 2.5% every quarter. You can keep the money in there, collecting interest, for up to 3 months after you redeploy back to America. I am on a 7 month deployment to Afghanistan. I put $5500 in on month 2 of my deployment (once again you can only begin the SDP after you complete 30 days in country) and $4500 for month 3. 4 months later (7th month of the deployment), I have made $295 in interest and I will be keeping the account for the additional 3 months after I re-deploy.

    Summary: I will make around $600 for an investment of $10000 for a year investment. I will be taxed on this gain when I get back so I will likely make around $450-500 after taxes. The 2.5% per quarter is more accurate than the 10% number that is advertised. The 10% does kind of apply, but only after spending a full year with your money in the SDP account. The math is still 2.5% per quarter though. I wish I would have realized that earlier on because the stock market would have likely earned a better percentage and been much easier to deal with than setting up the SDP account in the first place.However, I did obtain a 6% guaranteed gain on my money which can be offered nowhere else.

    I hope this breakdown can help anybody with questions.