Savings Deposit Program (SDP): Guaranteed 10% Return
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After the TSP, I invest my money in Betterment and Vanguard. I track all of my investments with Personal Capital. I also wrote a short, 2 hour book summarizing this site. You can buy it here.

Finding a bank account with an interest rate greater than 1% is difficult these days. Google Advisor, a free comparison tool for credit cards, CDs, checking, and savings accounts has the highest savings accounts at 1.3%. On 5 year CDs, the highest APY is 1.91%. These rates are barely beating inflation.

If you were to find a stockbroker, financial adviser, or just about ANYONE who offered you a guaranteed 10% return, run away or hang up the phone!

99.99% of the time, this is the hallmarks of a scam. Guaranteeing returns is how scammers like Bernie Madoff got thousands of people to turn over billions of dollars to him, which disappeared into his incredibly complex Ponzi scheme. So in general, ignore anyone who offers to guarantee such a good return, unless its the Department of Defense Savings Deposit Program (SDP).

The SDP is a special program set up by the DoD to “provide members of the uniformed services serving in designated combat zones the opportunity to build their financial savings.”

Here’s How it Works

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  • While deployed in a designated Combat Zone Tax Exclusion area, go to any military finance office after you’ve been in the CZTE for 30 days and fill out the required paperwork to make your deposit.
  • You can usually make deposits with your Eagle Cash Card, a check, or set up allotments to come out of your pay every paycheck
  • Any money in the account between the 1st and 10th of the month is eligible to collect interest, at a rate of 2.5% per quarter or 10% per year. So if you were to deposit $5000 on 15 May, it wouldn’t collect any interest for the month of May, but would start collecting in June.
  • You may deposit any amount you wish into the SDP, but only the first $10,000 will collect interest. If you have $10,000 in the SDP, you can elect to have quarterly payments made to you. This would mean an extra $250 every 3 months. Sweet!
  • The money will remain in your SDP and continue to collect interest for up to 90 days after you return from a combat zone. Another free $250! At any time you can withdraw some or all of the funds. After 120 days after departing the combat zone, the money will be automatically withdrawn and deposited back in your account linked to myPay, along with an interest accrued.

With $10,000 invested in the SDP, that’s $1000 a year in interest from a federally insured deposit program. No one else in the world has access to a guaranteed return like this.

How the SDP Works in Reality

The SDP is an incredible opportunity for service members to boost their investment income. However, there are a couple of caveats to the program:

  • Unless you get your commander’s signature, you can only deposit the amount of you’ve been paid while deployed. So if you’ve been in country for 30 days and only had total entitlements of $4000, you can only deposit $4000 at the 30 day mark. You can later top off the SDP to the full $10,000 throughout the course of your deployment.
  • As long as you continue to return to the CZTE for at least 1 day every 90 days, your clock resets. This is very beneficial for aircrew or military members who frequently transit the CZTE. I have heard of some Air Force pilots who have kept their SDP going for 3 years, before the system finally made them take the money out and redeposit it!
  • The interest on your SDP is taxed at the normal dividend and interest rate for your tax bracket. Unlike much of your combat zone pay, you have to pay federal taxes on your SDP. Still though, an awesome deal, especially if you’re already contributing to your Roth TSP and getting your money into there tax free.

Maximize Your Emergency Fund Return with the SDP

On my most recent deployment, I maxed out my SDP with the full $10,000 in the course of 60 days. I deposited $6000 at my 30 day deployed mark and the additional $4000 at the 60 day mark.

The SDP allowed us to finally get a decent return on my emergency fund savings, which were sitting in a low interest rate savings account. SDP funds can be withdrawn within a few days through a simple online form and direct deposited into your checking or savings account. Because of this flexibility, I believe you can utilize your SDP as a way to pump up your rainy day fund return while still maintaining quick access to your e-funds.

Always make sure you have at least 1-2 months of cash in a savings or checking account for unexpected expenses. If you’re comfortable with your level of instant access cash, investing the rest of your emergency fund money into a safe, easily accessible investment, like a CD or SDP, can be a great way to boost your emergency fund return. I prefer the SDP right now (when its available), because of the return and the liquidity.

The SDP is an amazing opportunity for servicemembers to put their hard earned pay to work. You can save an enormous amount of money while you’re deployed. Why not get a guaranteed 10% return on those savings?

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The best way I know to achieve financial independence is to keep your investments simple, diversified, automatic, and low-cost. Costs eat into your returns like you wouldn't believe! A 1% difference in expense ratios can mean $100,000s lost to fees over a lifetime of investing.

Even if you're a DIY (do-it-yourself) investor like I am, you need to check out Betterment. You can read my full review here, but the bottom line is for only $250 per $100,000 invested (0.25% expense ratio) you get simple, diversified, and automated investing. In addition every account now gets free Tax Loss Harvesting+ features, which should increase returns for the average investor more than the minuscule management fee.

If you're not a DIY investor or are just getting started with investing, then you definitely need to check out Betterment. It's what I recommend to my family and friends who aren't strong investors or don't care to learn about asset allocations, diversification, or rebalancing.

I have investment accounts all over the place. To keep track of all of them in one place I use Personal Capital. It combines all of my accounts, shows me where I may be overpaying in fees, and provides beautiful charts showing my overall asset allocation and performance.

I use Personal Capital to track my Roth and Traditional TSP, Vanguard IRAs, banking accounts, SDP, and my Betterment taxable account, all in one place. It's free, secure and presents me with a one-stop dashboard so I can see all my money on one site.

Read my full review of Personal Capital and see how easy it can be to manage your investments in one place. Trust me, once you try it, you'll love it.

P.S. - If you have over $100,000 of assets and a 401k, you really need to run the Personal Capital 401k Fee Analyzer.

Savings Deposit Program: The Only Guaranteed 10% Return
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