Deployment Financial Benefits

While deployed, your income, up to the highest rate of enlisted pay (senior E-9) plus imminent danger/hostile pay, is tax-free! Per Military.com, that cutoff for 2020 is $8,747.50 per each month spent in a combat zone. This amount will encompass your entire pay for the month and will even cover a bit of your bonuses. Even a single day of a month spent in a combat zone qualifies the entire month to be tax-free! See the link above for what regions are considered "combat zones."

Piggy-backing off of the benefit of tax-free pay, we have tax-free TSP and IRA deposits, more specifically, we have TRIPLE TAX-FREE TSP and IRA deposits. Do I have your attention? If you know the basics of Roth and Traditional retirement accounts (see here if you need the basics), this is the primary way to make them even better. If you recall, Traditional accounts have the benefit of the money you invest is deducted from your taxes when you make the deposit (1x tax benefit), and for Roth accounts, while you pay taxes on the money you earn, initially, you have the benefit of no taxes on your principal investment OR the growth of that investment (2x tax benefit) when you make your withdrawal. While deployed, your income is tax-free, so you will never pay any taxes on the money you invest in your Roth account at any time (3x tax benefits)!

Stipulations:

Regardless of deployment status, the standard Roth IRA contribution restrictions apply. At the time I write this (2021), you may only contribute to a Roth IRA if your adjusted gross income is: $125,000 (single), or $198,000 (married), with reduced contributions permitted up to a certain cutoff after this. There is no Roth TSP income limit.

Don't forget! You only receive your TSP contribution match from the Army for each month you contribute up to 5%. Any month you do not contribute, you do not receive the match. With that in mind, if you are deployed January through March, you'll want to dump as much money as you can into your TSP during the time you are deployed, HOWEVER, make sure you do the math to leave just enough left in your contribution limit for the year such that you can contribute at least 5% of your base pay for April through December to receive the Army match (it's free money!).

If you'd like to read more into the fine-print, this website goes well into the weeds for you: https://the-military-guide.com/maximizing-your-thrift-savings-plan-contributions-in-a-combat-zone/

Another retirement account advantage of deployment is extended contribution limits for your TSP! In 2021 (the amount generally increases annually), you can contribute up to $58,000 to your TSP while deployed. The only catch, here, is that while you may qualify for Roth contributions based on your salary (and while deployed, there is literally no reason why you would contribute to Traditional over Roth), any contribution above the standard cap ($19,500 in 2021), goes towards a traditional account.

This fact kinda kills the main incentive to pump money into your retirement accounts (you don't pay taxes on money invested into a Traditional IRA regularly, so there is no difference, there). At this point, you might as well invest any money over the standard cap into a regular, taxable, investment account since just like a Traditional TSP, you won't be paying taxes on the money you invest (your income is tax-free) and you WILL be paying taxes on the growth of your money. ALSO, for the traditional, you will also be paying tax on the principal amount when you make your withdrawal. For an investment in a standard investment account, you will have already "paid taxes" on that principal, so you won't get taxed again, AND you can take the money out whenever you want!

The only real benefit of putting your money into your TSP over a standard brokerage account is that retirement accounts enjoy certain privileges such as being immune to collections agencies if you are sued.

Hostile Fire/Imminent Danger Pay

• A special pay at the rate of $225/month for time spent in an area designated as subject to hostile fire. See this link for designated areas.

Family Separation Allowance

• If you have dependents, for separation from them for greater than 30 days, you will receive $250/month.

Hardship Duty Pay

• For being stationed, on TDY, or deployed to a location with living conditions substantially below the standard most members in the continental US would generally experience, you will receive between $50-150/month. See this link for designated areas.

After 30 consecutive days on deployment, you may open an SDP account. You may deposit up to $10,000 that will earn 10% interest annually. The account will continue to accumulate interest for 3 months after you return home. That means on a 10-month deployment, you can make up to $1000 in interest (one-month waiting period, nine months further interest, and then 3 months at home).

It may not sound pretty, but you will be receiving room and board for free! Depending on your living situation, dependents, etc, if you can stop paying rent for the time you are deployed, you will be pocketing quite a bit in BAH! Also, not paying for food will add up, too!