Thread: Deployment advice??

The whole time I had SDP they never put remarks on my Army LES. I noticed that once I closed out the account I got a "monthly statement" even though it was the first one I ever got. On mypay it's the option below LES.

But about withdrawing... I hope everyone kept their Cash Collection Vouchers (CCV) for SDP. Two of my deposits are not recorded and DFAS is currently working on getting me the money back. The solution is faxing a copy of the CCVs for the missing deposits to DFAS. So not only do they have to repay me the principal of what I deposited, but also recalculate the total interest due to me.

Lesson learned: call DFAS and request your balance and interest periodically just to make sure that their records match your records.

Call them at 1-800-390-2348, (DSN) 580-5122 (7:00 A.M. – 6:30 P.M. / Eastern time)

Originally Posted by shiftomnimega

I hope everyone kept their Cash Collection Vouchers (CCV) for SDP. Two of my deposits are not recorded and DFAS is currently working on getting me the money back.

Good advice. I made deposits into the SDP 2002-2003. Evertime I made a deposit, I found a scanner on the base, scanned the CCV and uploaded it to my AKO files server. That way, if I lost the document OCONUS, I still had the scanned copy available.

Funny thing about the SDP. I NEVER got a SDP 1099-INT for 2002 or 2003. I requested a copy and everyone just gave me a blank look. 9 times out of 10, they would say "What is SDP?" Of course, those were the early years of OEF/OIF. Well, guess what happened this month... Two news option appeared on mypay.dfas.mil:
- Savings Deposit Program (SDP) Statements
- SDP Tax Statement 1099-INT

I guess an amended return is now in order.

FatMoneyClip
I noticed the SDP statement appeared a couple weeks ago, but had to go back and look. Sure enough, I have an SDP Tax Statement for 2001 and 2002. I'm not trying to evade taxes, but I think that's far enough in history and such a little amount that I can forget about it. Now I know to look for it next time, though.

d3

Originally Posted by pyriel

Are all special pay factored in with the 44K limit?
Let's use a doctor for an example and he/she is getting a special pay of 10k per year and he is NOT DEPLOYED. Can this doctor put in 15k coming out of his basic pay? And if he choose to contribute 100% ofhis special pay, this would mean that he is putting in 25k in TSP?
What happens if he is deployed, would we factor in the 44k limit plus his 10k special pay?
Can somebody direct me to the right direction...

The $44K limit is THE limit. No person can contribute more than 44K in one year - period.

Similarly, if you're not deployed, $15K is THE limit. The IRS doesn't care whether it's base pay, bonus, special duty, whatever. You just can't contribute more than $15K unless you're deployed.

I've been told that these rules are built in to the system. ie You can just go to MyPay and set your contributions to 100%/100%/100% and when you hit the limit, your contributions stop. When you get to Jan 1, you automatically start contributing again. Since this is the first year with unlimited base pay contributions, I haven't seen it in action yet. I have a certain amount of distrust of what people tell me about DFAS working properly. We'll see if it works like it's supposed to.

d3

Gary,I wont give you advice on TSP,but do thank you for serving our country.Be careful over there,and keep your eye on your buddy.Back in 69,I was in a similar position,and this war and rules of engagement are getting very political and thats a bad omen for a soldier.I will pray for you and your family.
Bill

What kind of sleaze hypocrite is this? He was only 14 years old in 1969. But he is gone now. There will always be justice delivered.

Greetings all,

Can anyone explain the point of maintaining TSP contributions during a deployment? Isn't the better plan to stop them altogether while your income is tax-free? Any thoughts?

Regards,

Originally Posted by Stepanwolf

Can anyone explain the point of maintaining TSP contributions during a deployment? Isn't the better plan to stop them altogether while your income is tax-free? Any thoughts?

I don't know much about the tax laws as they pertain to military pay, but if are suggesting throwing money into a Roth instead of TSP while deployed, you may be on to something. No pre-tax or post-tax on earnings sounds like a sweet deal.

Welcome to the board, by the way!
Tom

Hey Tom,

Thanks for the welcome. The short course on military taxes is that all income is tax-free if you are deployed in a combat zone or qualified hazardous duty area as long as you are an O-4 or lower. My point was regarding the utility of using tax-free income to fund a tax-deferred investment. Assuming a 25% tax bracket and no credit card debt, it seems to me the investment priorities should be in the following order:

1. Full contributions into a Roth IRA;
2. $10,000 into the savings deposit plan; and
3. Everything else into a low-tax mutual fund for long-term investment (for example, VMCAX, not that I am pushing Vanguard).

I know that suggesting the discontinuation of TSP contributions in this forum may be heresy, but what is the point of deferring tax for a 25% rate on tax-free income when you could instead defer a 15% capital gains tax on the gain only, per option 3.?

Granted, I am assuming that the tax rates do not drop, and acknowledge that you would have less flexibility with the mutual fund, but I also believe there is the added benefit of tax diversification for retirement; tax-free (Roth), tax-deferred (TSP) and capital gains (mutual fund). What do you think?

Regards,

I agree - Take advantage of the tax savings and get more investment options. What's not to like?

Originally Posted by Stepanwolf

Hey Tom,

Thanks for the welcome. The short course on military taxes is that all income is tax-free if you are deployed in a combat zone or qualified hazardous duty area as long as you are an O-4 or lower. My point was regarding the utility of using tax-free income to fund a tax-deferred investment. Assuming a 25% tax bracket and no credit card debt, it seems to me the investment priorities should be in the following order:

1. Full contributions into a Roth IRA;
2. $10,000 into the savings deposit plan; and
3. Everything else into a low-tax mutual fund for long-term investment (for example, VMCAX, not that I am pushing Vanguard).

I know that suggesting the discontinuation of TSP contributions in this forum may be heresy, but what is the point of deferring tax for a 25% rate on tax-free income when you could instead defer a 15% capital gains tax on the gain only, per option 3.?

Granted, I am assuming that the tax rates do not drop, and acknowledge that you would have less flexibility with the mutual fund, but I also believe there is the added benefit of tax diversification for retirement; tax-free (Roth), tax-deferred (TSP) and capital gains (mutual fund). What do you think?

Regards,

I've always advocated that we should max out TSP and ROTH IRA. People will have different tax tax bracket and outlook on retirement which is why there is no right or wrong answer on which one should be funded and maxed out first. However, with this scenario, I agree that ROTH IRA should be funded first. I would also advocate that deployed soldier try to max out the caps for TSP while in theater (44k). Through compounding, 44k will go a long way than the regular 15k that we are allowed when we are not deployed.

Some people say that 44k is just too much to invest and it is hard to do. My recommendation is to skip SDP if you really don't need the money. SDP interest is limited for 10% and only good within a year (or several months after deployment). This is a good way of putting money aside instead of putting it in savings and if you plan on using it once you get home. But if you really don't need the money, you might as well put it in TSP so it can earn compounding interest.

Although, you may not use the TSP contribution to help you ease your tax burden for the following year, maxing out TSP will greatly help you in the future rather than putting it in a low tax mutual fund.

Having low tax mutual fund is good to have but only if you can max out both ROTH and TSP.

Pyriel