MILITARY MONEY MINUTE
A Monthly Financial
SDP – THE HIDDEN GEM
What would you say to a financial advisor if they told you they could guarantee you a 10% annual rate of return on your money, compounded quarterly? You’d probably check their credentials and then maybe report them to FINRA or at least walk out the door. Well, we’re telling you there is such a deal. So, how do I get in on this you may ask? All you have to do is deploy to a combat zone!
Defense Finance and Accounting Service (DFAS) administers the Savings Deposit Program (SDP). SDP offers a guaranteed annual return of 10%, compounded quarterly, on up to $10,000 contributed to the program. This far exceeds the return on any traditional savings account out there. In fact, it’s a good return compared to most any other investment. Sure, you may be able to beat that rate of return by putting your money in the stock market when the market is having a good year, but how can you predict a good year? Even Warren Buffett doesn’t have a lock on that gouge. The truth is, you can’t time the market, and you most certainly won’t find a stock, bond, fund, or ETF in the marketplace that will guarantee you a 10% annual rate of return.
HOW IT WORKS
You can participate in SDP if you are serving in a designated combat zone, qualified hazardous duty area or certain contingency operations outside the United States for more than 30 consecutive days or for at least one day for each of three consecutive months. Contact your Admin department or the finance office at your deployment location. They will let you know if you or your unit are eligible, will provide assistance with the necessary paperwork and will explain when you can begin making deposits.
A total of $10,000 may be deposited during each deployment and will earn up to 10% interest annually. You cannot close your account until you have left the combat zone, although your money will continue to draw interest for 90 days once you’ve returned home or to your permanent duty station. Interest earned in your Savings Deposit Program is taxable, even though your income while deployed is not taxable. Uncle Sam always gets his cut.
Deposits may be made in cash, by check or through allotment. Once started, allotments may be increased or decreased as your financial situation changes. Your allotment will stop upon your departure from the combat zone. Once you make your initial deposit, interest accrues on the account at an annual rate of 10% while compounding quarterly. Let’s take an example.
You leave for a known nine month deployment to the fun zone and you want to immediately deposit that $10,000 you have lying around. Interest earned on $10,000 deposited into the SDP for nine months would total $768.91. The last day to make a deposit into the fund is the date of departure from the assignment, and interest will accrue at the 10 percent rate up to 90 days after return from deployment. That said, wait 3 months after you get back and interest earned would total $1038.13!
That’s not a bad gig for just letting your money sit around. Not like you have anything to spend it on over there anyway… Well, those Persian rugs are pretty nice!
Lara Ryan and Daniel Chavarria work with a team and run a comprehensive financial planning practice that specializes in working with active duty, retired, veteran and military-connected individuals, families, and businesses.