SDP (Savings Deposit Program): The 10% Guaranteed Return Explained
Category: Deployment Finance
Last Updated: 2025-01-25
Effective: Current (2025)
Sources: DoD Financial Management Regulation, DFAS SDP Info
BLUF (Bottom Line Up Front)
The Savings Deposit Program (SDP) is the single best guaranteed investment available to service members deployed to designated combat zones. You can deposit up to $10,000 and earn 10% annual interest (compounded quarterly) - risk-free, government-backed, and better than any savings account or CD in America.
If you're deploying to a combat zone and don't max out SDP, you're leaving free money on the table.
What is SDP?
The Savings Deposit Program allows service members serving in designated combat zones to save up to $10,000 and earn 10% annual interest, compounded quarterly. This is:
- 4-5x better than the best high-yield savings accounts (~2%)
- Guaranteed by the U.S. government (zero risk)
- Tax-advantaged if deposited from combat zone pay (CZTE - Combat Zone Tax Exclusion)
- Available ONLY during deployment to qualifying locations
Who Qualifies?
You must be:
- Serving in a designated combat zone (IRS-defined)
- On active duty for 30 consecutive days or more in the combat zone
- Receiving hostile fire pay or imminent danger pay
Common qualifying locations (as of 2025):
- Iraq, Afghanistan, Syria
- Arabian Peninsula (Kuwait, Saudi Arabia, UAE, etc.)
- Jordan, Djibouti
- Other IRS-designated combat zones
Check your LES: If you see "HFP" (Hostile Fire Pay) or "IDP" (Imminent Danger Pay), you likely qualify.
How SDP Works
Maximum Deposit: $10,000
You can deposit up to $10,000 total during your deployment. This is a cumulative lifetime limit per deployment period, not per month.
Interest Rate: 10% Annual (Compounded Quarterly)
- 2.5% per quarter (10% annual ÷ 4 quarters)
- Compounded - you earn interest on your interest
Example Calculation:
- Deposit $10,000 on Day 1 of deployment
- After 3 months (1 quarter): $10,000 × 1.025 = $10,250
- After 6 months (2 quarters): $10,250 × 1.025 = $10,506.25
- After 12 months (4 quarters): $11,038.13
Result: $1,038.13 in guaranteed interest on a $10,000 deposit over 1 year.
When Interest Accrues
- Interest starts accruing the day your deposit is received
- Interest is compounded quarterly (every 3 months)
- Interest continues accruing for up to 90 days after you leave the combat zone
Withdrawal Rules
- You cannot withdraw while deployed (money is locked in)
- Money is returned within 120 days after leaving the combat zone
- Final payment includes principal + all accrued interest
- Payment is made via direct deposit or check
How to Maximize SDP
Strategy 1: Deposit Early and Often
The earlier you deposit, the more interest you earn.
- Best: Deposit $10,000 immediately upon arriving in the combat zone
- Good: Deposit as much as possible in the first 30-60 days
- Suboptimal: Wait until month 6 of a 12-month deployment (you miss 6 months of interest)
Why it matters:
- Depositing $10,000 on Day 1 vs. Day 180 means $500+ difference in interest earned
Strategy 2: Use Combat Zone Pay
If you deposit money earned in the combat zone (which is tax-free due to CZTE), your SDP returns are effectively tax-free too.
Example:
- E-5 with 6 years deployed to Kuwait
- Base pay: $3,500/month (tax-free in combat zone)
- Deposit $3,500/month × 3 months = $10,000 (hits max)
- Earn $1,038 interest over 12 months (tax-free)
Strategy 3: Pre-Save Before Deployment
If you know you're deploying in 6 months, start saving now so you can hit the $10,000 max on Day 1.
Pre-Deployment Savings Plan (6 months out):
- Month 1-6: Save $1,667/month
- Deployment Day 1: Deposit full $10,000 to SDP
- Result: Maximum interest earned
Real-World Example
Scenario: E-5 Deploying to Kuwait for 12 Months
Profile:
- Rank: E-5 with 6 years
- Base Pay: $3,500/month (tax-free in combat zone)
- BAH: $1,700/month (continues, even downrange)
- Deployment: 12 months in Kuwait
SDP Strategy:
- Pre-deployment: Save $5,000 before leaving
- Month 1 of deployment: Deposit $5,000 (from pre-savings) + $5,000 (from combat zone pay) = $10,000 total
- Months 2-12: Let interest compound
Results After 12 Months:
- Principal: $10,000
- Interest Earned: $1,038.13 (10% compounded quarterly)
- Total Received: $11,038.13
- Plus: 90 days of additional interest after returning home (~$253 more)
- Grand Total: ~$11,291
Bottom Line: You earned $1,291 in guaranteed interest just for deploying. That's free money for doing what you were already doing.
Common Mistakes to Avoid
Mistake #1: Waiting Too Long to Deposit
Problem: Service members wait until month 6+ of deployment to start depositing.
Cost: Lose 6+ months of interest (easily $400-500).
Fix: Deposit as early as possible, ideally within first 30 days.
Mistake #2: Not Hitting the $10,000 Max
Problem: "I'll just deposit $5,000 and keep the rest liquid."
Cost: Miss out on $500+ in interest.
Fix: Max out SDP first, THEN save elsewhere. SDP is the best return you'll ever get.
Mistake #3: Not Verifying Eligibility
Problem: Assume you qualify without checking.
Cost: Deposit gets rejected or delayed.
Fix: Check your LES for HFP/IDP. Verify your location is IRS-designated combat zone.
Mistake #4: Forgetting About the 90-Day Bonus
Problem: Forget that interest continues for 90 days AFTER leaving the combat zone.
Benefit: Extra $200-300 in interest you didn't even have to be deployed to earn.
Action: Don't stress about withdrawal timing - the government handles it automatically.
How to Enroll in SDP
Step 1: Verify Eligibility
- Check your LES for HFP (Hostile Fire Pay) or IDP (Imminent Danger Pay)
- Confirm you've been in the combat zone for 30+ consecutive days
- Verify your location is an IRS-designated combat zone
Step 2: Complete DD Form 2558
- Get form from your finance office or unit admin
- Fill out:
- Personal info
- Deposit amount (up to $10,000 total)
- Allotment amount (if doing monthly deposits)
- Sign and submit to your unit finance office
Step 3: Set Up Allotment (Recommended)
Best Method: Set up a monthly allotment from your pay.
Example:
- Allotment: $2,500/month × 4 months = $10,000
- Pros: Automatic, forces you to save, hits max quickly
- Cons: None (you can always stop the allotment if needed)
Step 4: Verify Deposit
- Check with finance office after 30-60 days
- Verify deposit was received and interest is accruing
- Get confirmation statement
Don't assume it worked - verify it.
Frequently Asked Questions
Can I withdraw money early?
No. SDP is locked during deployment. You get your money back 90-120 days after leaving the combat zone.
What if I need emergency funds?
Plan ahead. Keep a separate emergency fund (3-6 months expenses) BEFORE maxing SDP. SDP should be "extra" money you don't need.
Can I do this on every deployment?
Yes. You can participate in SDP on every qualifying deployment. The $10,000 limit resets for each deployment period.
Is the interest taxable?
It depends. If you deposit combat zone pay (tax-free), the interest is also tax-free. If you deposit non-combat pay, the interest is taxable.
What happens if I get injured or leave early?
Interest continues for 90 days after you leave the combat zone, regardless of why you left. You still get paid out within 120 days.
Can I add money after hitting $10,000?
No. $10,000 is a hard cap. Once you hit it, you're done (which is a good problem to have).
Next Steps
Immediate Actions:
- Check Eligibility: Look at your LES for HFP/IDP designation
- Get DD Form 2558: Download or get from finance office
- Pre-Save Before Deployment: Start saving $1,667/month if deploying in 6 months
- Set Up Allotment: Visit finance office within first 30 days of deployment
- Verify Deposit: Confirm with finance after 30-60 days
Garrison Ledger Tools:
- LES Auditor: Verify your combat zone pay and HFP/IDP designation (Dashboard → LES Auditor)
- Deployment Finance Calculator: Calculate SDP returns based on your deployment length (Coming Soon)
Official Resources:
- DFAS SDP Info: www.dfas.mil/sdp
- IRS Combat Zones: www.irs.gov/individuals/combat-zones
- DoD FMR (Chapter 5): comptroller.def.gov/FMR
Verification Checklist
Before deploying, verify:
- [ ] Your deployment location is an IRS-designated combat zone
- [ ] Your LES shows HFP or IDP pay
- [ ] You have DD Form 2558 ready to submit
- [ ] You've saved enough to hit $10,000 max quickly
- [ ] You have a separate emergency fund (don't lock up ALL your money)
SDP is the single best guaranteed investment you'll ever have access to. Max it out, earn your 10%, and come home with an extra $1,000+ in your pocket. No strings attached.
🎖️ Deploy smart. Save smarter.