If you’ve been in the military for any amount of time, you’ve probably heard of the military savings deposit program – otherwise known as the SDP. The SDP was enacted by the DoD as a way for military members to boost their savings while deployed. It is available exclusively to those who are serving in a combat zone. Although the program has been around for decades, it’s one military benefit that many are still unfamiliar with.

In order for you to know if you can and should utilize the SDP you’ll need to get familiar with the program. The SDP is not one-size-fits-all and there are plenty of pros and cons to consider before deciding if it’s is right for you, given your unique financial situation. That said, the SDP can provide a fantastic opportunity for military members to put their money to work for them.

What is the Military Savings Deposit Program?

The military savings deposit program allows military members who are serving in a designated combat zone to contribute up to $10,000 into a savings account set up by the Department of Defense. The account earns 10% interest annually, compounded quarterly, while you are in the combat zone and up to 90 days after you leave the combat zone. The interest is guaranteed and risk-free.

How does the program work?

Although the SDP is pretty straightforward, it’s important to fully understand its requirements and benefits.

First, you must be eligible to participate. Eligibility requirements are as follows:

  • You must be an active duty, guard or reserve member deployed to an eligible location.
    • SDP eligible locations include designated combat zones, qualified hazardous duty areas, and contingency operations outside the US receiving HFP/IDP.
  • AND you must be in the eligible location for 30 days in a row OR at least 1 day a month for 3 consecutive months.

Second, you’ll want to understand the basic SDP rules. This includes how to set up your account, how to make contributions, contribution limits, and rules for withdrawals. These are outlined below.

Setting up the SDP

How you set up the SDP account may vary by deployed location. Generally, you’ll contact the finance office where you’re located and they will help you fill out the necessary paperwork to get started.

Contributing funds to the SDP

You can contribute up to $10,000 total to the SDP. However, you can only contribute up to your unallotted pay amount each month – i.e. the amount of pay leftover after deductions. (I have read that officers can contribute only up to the highest level of enlisted pay, however, I was unable to find anything official to substantiate this.) This doesn’t necessarily have to come from your pay directly as an allotment, but it can’t exceed what could.

With these limitations in place it may be difficult or even impossible to contribute the full $10,000 simply because of timing. You may not be deployed long enough to take full advantage of the program or your unallotted pay may be low enough that it takes your full deployment to reach the maximum.

In any case, any money you are able to contribute is likely going to be worth your while. Again, 10% interest that is guaranteed and risk-free is basically impossible to come by anywhere else.

  • Contributions to the SDP can be made via cash, check or allotment, in increments of $5.
  • You do not have to contribute the same amount each month.
  • You can discontinue contributions at any time.
  • Contributions and earning can be monitored through myPay. Your SDP balance will also show up on your LES. You’ll want to check both regularly to make sure funds are being applied as intended.
  • Your eligibility to contribute to the SDP ends the day you leave the combat zone and redeploy home.

Withdrawing funds from the SDP

Your money will automatically be returned to you by direct deposit 120 days after you leave the combat zone. Here’s additional information about withdrawals and withdrawal procedures:

  • You can withdraw any money in excess of $10,000 once your account reaches $10,000.
  • You may be able to make early withdrawals due to emergency or extenuating circumstances. These withdrawals must be approved by your commanding officer and must be deemed necessary for the health and welfare of you or your family.
  • You can request to withdraw all of your money (contributions and interest) immediately after leaving the combat zone.
  • You can choose to withdraw your money 90 days after leaving the combat zone. This is a good option because your money will continue to accumulate interest for up to 90 days but no more.

If you want your money before the 120-day period ends, you can request it through myPay which has an automated request option for SDP participants. You can also send a request including your name, Social Security number and departure date from the combat zone:

  • by e-mail to dfas.cleveland-oh.jfl.mbx.sdp-cle@mail.mil
  • by fax to (216) 522-5060 “Attention: SDP”
  • by mail to DFAS-Cleveland Center (DFAS-CL), ATTN: SDP, Special Claims, 1240 East 9th St., Cleveland, OH 44199-2055

Important additional considerations

The 10% interest rate the SDP offers is significantly better than you will find elsewhere. By comparison, a high-yield savings account offers roughly 2% interest and the average rate on a standard savings account is currently 0.09%. Many banks offer a much lower APY of only 0.01% though – on $10,000, that’s the equivalent of just $1.00 per year.

If you decide to utilize the military savings deposit program, it’s important that you have an emergency fund in place. This is for two reasons:

  1. You’ll need permission to make early withdrawals from your account if necessary. This can be problematic if an emergency pops up back home and you don’t have cash on hand or time to wait for approval.
  2. Anytime you adjust your pay in any way, it’s possible that you may experience a hiccup or two. You’ll need to be careful to watch your pay and ensure it’s correct. If it’s not, it may take some time to remedy so you want to make sure you can ride out the so-called storm if pay troubles pop up.

Also, be aware that the interest you earn is taxable. The combat zone tax exclusion does not extend to the SDP.