John asked, “I have recently learned about the Military Savings Deposit Program because I will be stationed in a eligible area. What this also means is that my income will be tax free.”
Max it out. A guaranteed 10% return is pretty damned impossible to find right now.
That said, there are many municipalities/government entities that need to issue bonds now for various reasons. Most of them are perfectly solid, well-funded organizations who are caught in the same credit market nastiness as everyone else and are stuck paying out. There are some tremendous returns available, tax-free, in muni bonds right now.
Pros: tax free. There are plenty of well-rated organizations that are paying the equivalent of 8% with the tax-free status factored in (assuming you’re an average American whose income would put those returns in the 25% bracket).
Cons: Much less liquid than a simple savings account.