The DOD Savings Deposit Program (SDP) is a special savings program that's designed for military members who serve in designated combat zones. This savings program is one of several benefits the federal government offers to servicemembers to help them further their financial goals. These special savings plans have specific guidelines for making contributions and withdrawals, as well as rules for who can contribute to them.

Key Takeaways

  • The DOD Savings Deposit Program (SDP) is a special savings program for members of the military who serve in designated combat zones.
  • This savings plan allows military personnel to earn interest on deposits, though there are rules for contributions and withdrawals that must be followed.
  • The DOD savings plan is offered in addition to other savings benefits that include federal retirement plans and the Thrift Savings Plan (TSP).
  • Servicemembers must meet eligibility requirements to make contributions to a special savings plan.

Understanding Savings Deposit Program (SDP)

The Savings Deposit Program is offered by the Department of Defense (DOD) to members of the uniformed services. The program has one primary goal: to help eligible members of the military build their financial savings.

Service members can contribute to a Savings Deposit Program account if:

  • They're serving in an SDP-eligible combat zone
  • They've been deployed a minimum of 30 consecutive days or at least one day in each of three consecutive months
  • They're receiving Hostile Fire Pay

Military members who are eligible to contribute to one of these accounts can do so through any military finance officer in theater.

Note

The Savings Deposit Program is not a retirement savings program, nor is it the same as savings accounts offered to military members through banks and credit unions.

Savings Deposit Program Deposits and Withdrawals

Special savings plans have certain guidelines regarding contributions and withdrawals. Military members who open one of these accounts can deposit up to $10,000 total. Contributions can be made by cash, check, or through allotment. Allotments can increase or decrease as the service member's financial situation changes and these deposits cease once they leave the combat zone.

Here's why you'd want to participate in this plan: Savings Deposit Program accounts earn interest at a flat rate of 10% annually, putting them well above the typical interest rates associated not just with traditional savings accounts, but also with high yield savings accounts.

DOD rules require Savings Deposit Program accounts to be closed and all monies returned to service members via direct deposit 120 days after leaving the combat zone. It's possible to withdraw money from a special savings plan before leaving a combat zone, however.

Early withdrawals are allowed under the following circumstances:

  • Account balance reaches $10,000. If this happens, you can withdraw amounts over $10,000 on a quarterly basis.
  • Emergencies. Emergency withdrawals are allowed if they're approved by your commanding officer and are deemed necessary for the health and welfare of you or your family.

If you're within the 120-day window after leaving a combat zone, you can also request an early withdrawal. You can make this request automatically through your online myPay account or by email, fax, or regular mail. Requests must be directed to the Defense Finance and Accounting Service located in Cleveland, Ohio.

Tip

If you're requesting early withdrawal, be sure to cancel your allotment first if you're making deposits this way.

Balances are returned by direct deposit unless you request a paper check instead. If you choose direct deposit, you'll need to provide the name, routing number and account number of your bank. If you choose a paper check, you'll need to tell the Defense Finance and Accounting Service which mailing address to send it to.

Note

Interest continues to accrue on balances up to 90 days after leaving a combat zone.

Other Military Savings Options

The Savings Deposit Program is a special savings option for military members who are deployed in combat zones. But it's not the only way to save money if you're serving in the military. Other ways to save while in the military include:

Here's a closer look at how each of these military savings options works.

Military retirement plans

Military personnel can take advantage of retirement benefits through the Legacy Retirement System or the Blended Retirement System, depending on when they enlisted. Service members who enlisted before December 31, 2017, are covered by the Legacy Retirement System while those who joined military service on or after January 1, 2018, are automatically covered by the Blended Retirement System.

The Legacy Retirement System is a defined benefit plan. If you serve 20 years or more and are covered by this plan, you'll receive a lifetime monthly annuity at retirement. Annuity benefit amounts are based on the number of years of service and the average of the highest 36 months of basic pay.

The Blended Retirement System is a combination of a defined benefit plan and a defined contribution plan. The defined contribution plan portion of the Blended Retirement System allows military members to participate in the Thrift Savings Plan.

Thrift Savings Plan (TSP)

The Thrift Savings Plan is a defined contribution plan that functions like a 401(k). Military members can choose a traditional TSP or a Roth TSP and make contributions at a minimum rate of 1% of base pay. Traditional TSP contributions are made on a pre-tax basis while Roth contributions are made using after-tax dollars.

The IRS does limit how much you can contribute to a Thrift Savings Plan. For 2021, the annual contribution limit is set at $19,500 for elective deferrals. A catch-up contribution of $6,500 is allowed for military members aged 50 or older.

Tip

Contributing to a TSP can allow you to take advantage of a DOD matching contribution of up to 5%.

Military savings accounts at banks and credit unions

In addition to the Savings Deposit Program, military members can open savings accounts at banks and credit unions. Many financial institutions offer savings accounts and other deposit accounts specifically for military members and their families. These military banks may offer accounts with offer enhanced benefits, such as fee waivers or a higher APY for military savers.

In addition to savings accounts, military banks and other banks that offer accounts to military members may also offer additional benefits. That can include fee-free checking accounts or discounted interest rates for loans.

The Bottom Line

The Savings Deposit Program can make it easier for military members who are serving in eligible combat zones to save some or all of their base pay while taking advantage of a highly competitive interest rate. If you're not serving in a combat zone, you won't be able to contribute to one of these special savings plans. But there are other ways to grow your savings as a member of the military, including military savings accounts at banks and credit unions. If you're considering these accounts, remember to shop around to find the best combination of the highest possible interest rates and lowest fees.