Military Tips while Deployed

So my day job is teaching financial education to the military. I have the privilege and honor of serving an incredible audience. This post is specifically for service members who are preparing or in deployed locations.

The first is the Savings Deposit program (SDP). SDP is a one of a kind, which can only be utilized by deployed service members while in theater. This program allows service members to deposit up to $10,000 in a savings account that earns 10 percent annually (compounded quarterly). To be eligible, the service member must meet the criteria and start the program with the finance office in the deployed location. For more info, go to: http://www.dfas.mil/militarypay/woundedwarriorpay/savingsdepositprogramsdp.html

Secondly, if you are young and deployed and have extra cash, consider putting the funds into a tax-free Roth account. If you used deployed (tax-free) money in a Roth, then you will never be paying taxes on that money (assuming you use it for the specified purpose). Roth IRA earnings are also tax free for education and for a first time home purchase. Remember that for 2009, you can only put $5,000 into a Roth with a $1,000 catch up contribution for those over 50. (Here’s a good break down of the differences between a Roth and an IRA http://www.fool.com/money/allaboutiras/allaboutiras03.htm).

Finally, once you’ve maxed SDP, the Roth IRA, I would also suggest you max your Thrift Savings Plan (TSP). TSP is the federal government’s 401(K)-style plan. You can place pre-tax contributions up to $16,500 in 2009 into your TSP account, unless you are in a combat zone. The combat zone tax exclusion for 2009 is up to $49,000 including bonuses & combat pay!! That’s a great way to get jump start on your retirement. Oh and note, tax-exempt contributions will not be taxable even after withdrawals!! You can’t beat this deal for a retirement tax advantage. TSP offers a choice of six low cost funds, including 2 bond funds (G&F), 3 stock funds (C,S,&I), and lifecycle funds (L). For more info on the combat zone tax exclusion go to: http://www.tsp.gov/forms/tspbk08.pdf (see page 9) or see www.tsp.gov

And as always, get a second opinion for your specific financial situation. Military members can call Military OneSource (www.militaryonesource.com) 24/7, 365 days a year at no charge. They have financial counselors and planners to help you with your specific situation. Best wishes and thank you for giving all of us back at home the privilege of freedom.