ASK KIM


Guaranteed-Interest Accounts for Military Members

Kimberly Lankford

If you're deployed in certain combat zones, you can deposit money in an account that earns 10% a year.



Is it true that members of the military can earn a guaranteed 10% interest per year on their money when deployed? How do they do that?

It certainly is true. Earning 10% per year --guaranteed -- sounds like a scam, but in this case it isn’t. Service members who are deployed in designated combat zones (such as Iraq, Afghanistan and most of the Persian Gulf region) can deposit up to $10,000 into a special account that pays 10% per year. The interest, which is taxable when withdrawn, stops accruing 90 days after you leave the eligible region.

You can sign up for this account, called the Savings Deposit Program, only after you’re deployed, but you can calculate how much you can afford to invest ahead of time.

You will receive extra money in your paycheck when you’re in a combat zone because your income is tax-free during that time. So if you’re in the 25% income-tax bracket (with taxable income of more than $33,950 on an individual return), you'll avoid $250 in taxes for every $1,000 you receive in tax-free, combat-zone pay. You can stick that extra money in the account earning 10% interest, then withdraw the money and all the interest 90 days after you return.

For more information, go to the Defense Finance and Accounting Service military pay page and type “Savings Deposit Program” into the search engine.

For more financial advice to help military families, see our new Personal Finance for Military Families special guide.

Got a question? Ask Kim at askkim@kiplinger.com.




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