A 10 Percent Savings Rate?

Yes, but Theres a Catch

What would you think of earning 10 percent on your savings?
There is a catch, of course. Getting this rate involves risking your life in a foreign
country. Its only available to members of the United States military serving in
designated combat zones, including Afghanistan, Iraq, Pakistan and the Persian Gulf.
The rate is available through the Department of Defense Savings Deposit Program.
The program, which dates to the Vietnam era, was created to provide members of the
uniformed services serving in a designated combat zones the opportunity to build their
financial savings.
Joseph Montanaro, a financial planner with USAA which provides banking and
financial services for members of the military and their families, says the program can
be a boon for service members, allowing them to earn about 10 times what their
money would earn in a typical domestic savings account at current rates.
There are a host of conditions, however. To qualify, military members must be
deployed in a combat zone for either 30 consecutive days, or at least one day in each
of three consecutive months. A maximum of $10,000 can be deposited in the account,
typically by automatic paycheck withdrawal (or allotment, in military parlance).
The program is restricted to pay earned while in the qualifying zone. Soldiers cant
deposit more than their net monthly pay. Nor can service members simply take
$10,000 they had managed to save in a low-rate certificate of deposit and put it in the
military program as a lump sum to earn the higher rate, said Steve Burghardt, a
spokesman for Defense Finance and Accounting Service.
The funds are paid out when the combat tour is finished, he said. Money can be left in
the account indefinitely but interest accrues for just 90 days after soldiers return
from combat duty. In general, the funds cant be withdrawn until soldiers are no
longer eligible for the program. If an emergency comes up, military members have to
petition their commanding officer to obtain early access to the money.
And, while combat pay isnt taxable, interest earned in the savings program is.
Roughly 19,500 service members currently participate in the program, Mr. Burghardt
said.
According to an online savings calculator if a soldier deposited $300 a month into the
savings program for a year at 10 percent, hed earn about $170 in interest. A 1 percent
rate the most generous currently available on low-risk savings accounts back home
would earn roughly $17. So the program appears to be a benefit, for those who are
eligible and who dont need access to the money right away.
As for those of us who arent eligible, maybe we should just be thankful that were
not.