Military Saves Week: Taking Advantage of the Financial Benefits of Deployment

By Carol Church

As every member of the military knows, being deployed can be stressful, intense, and difficult. However, it also comes with one advantage: increased pay. In some cases, service members may also experience a significant decrease in living expenses.

Extra money from deployment can get service members out of debt, dramatically bump up savings, and create financial security where there was none. However, handled imprudently, extra earnings from deployment can also set up a financial house of cards or disappear into unwise purchases. Here are some tips to help service members max out the financial advantages of deployment while also staying financially on track.

First, decrease expenses as much as possible:

–Cancel, suspend, or reduce car insurance on any vehicles (including motorcycles) that will not be used during a deployment. You will need to consider storage options; if the car will be exposed to the elements, there are special policies you can switch to that cover weather damage only (available through USAA).

— Cancel or suspend cell phone service, cable TV, and home phone (if applicable). Under the terms of the SCRA, service members who are deploying must be given a penalty-free exit from contracts like these. Of course, if you have a family at home using these, this may not apply!

–Reduce the interest on your mortgage and any outstanding credit card loans to 6% under the SCRA. Typically, the credit card debt must have been incurred or the mortgage initiated before entering service for this to work. Also, be aware that this does not happen automatically-you must file paperwork. To learn more, visit SCRA Questions and Answers.

Photospin/lev dolgachov

Second, put that money away:

–Save in SDP

One of the most amazing benefits available to deployed service members is the Savings Deposit Program. Service members deployed to eligible designated combat zones can put up to $10,000 per deployment in this account, tax-free, and it will earn 10% interest annually as long as you are in the combat zone. Funds will be returned to the service member after he or she returns (or before in cases of emergency). This is an incredible rate of return that no one should pass by.

–Save in the TSP or Roth IRA

When the new blended retirement system comes online, many service members will already be automatically contributing to and getting matched funds for TSP. However, it will still be possible for most to increase the percentage they contribute during this time period. Be aware that there is an annual limit for both TSP and Roth IRAs.

Third, don’t overspend:

A common but very dangerous error is to readjust the family discretionary spending upwards around the temporary additional pay, or to do something like building an addition, buying a brand-new truck, etc. The USAA recommends that service members put away a full two-thirds of their additional deployment pay, and strongly cautions service members against incorporating past earned deployment pay into new budgets when they return.

Deployment can be a difficult time for service members and their families, but it does come with the benefit of increased income. With care and forethought, service members should be able to make progress towards their financial goals during this time.

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