The TSP vs. the SDP: Don‚Äôt Let the Letters Confuse You
By Kisha A. Taylor, Writer/Editor, Federal Retirement Thrift Investment Board
This year, Military Saves Week is February 23-28, and the theme is, ‚ÄúSet a goal. Make a plan. Save automatically!‚Äù Saving money is not always easy, but the Federal Government offers two programs to make saving easier for military service members: the Thrift Savings Plan (TSP) and the Department of Defense‚Äôs (DoD) Savings Deposit Program (SDP). While these savings programs help you become financially ready, they are entirely different from one another. To avoid confusion, you should familiarize yourself with the differences.
For starters, the TSP is a long-term retirement savings plan that is open to all active service members. It‚Äôs a lot like a private sector 401(k) plan. You can elect to contribute 1% to 100% of your basic pay to the TSP as soon as you join the military. The TSP doesn‚Äôt replace your military retirement pension, which is available only if you serve for a minimum of 20 years. Rather, the TSP is an excellent opportunity for you to supplement your retirement income through long-term saving.
The SDP, on the other hand, is a short-term savings program that is only available to service members who are deployed in combat zones or other operations and are receiving Hostile Fire Pay/Imminent Danger Pay (HFP/IDP). You can only set up an SDP account after you‚Äôve been deployed for 30 consecutive days or for at least one day in three consecutive months. You can build your financial savings by reaping the benefits of SDP‚Äôs high returns.
The chart below shows the additional differences between the TSP and the SDP. Use it to help you make the best decisions for your financial objectives.
Now that you‚Äôre clear on how both savings options work, you can make the best choices for your short- and long-term financial goals. To enroll in the TSP, log into myPay and select the ‚ÄúTraditional TSP and Roth TSP‚Äù option. If your service doesn‚Äôt use myPay, you can submit Form TSP-U-1, Election Form, found at tsp.gov. To learn about the SDP, visit DFAS.mil.