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Fatwa ID: 23284
Title: Zakat and the 401k retirement plan
Category: Poor-due or obligatory charity (Zakaah)
Scholar: Dr. Main Khalid Al-Qudah
Date: 07/11/2008
Question

I have question on zakah and the 401k investment plan. How should I calculate the zakah to be paid on my 401K investment? Please advise.

 

Jazak Allahu khair,

Yahya

Answer

•  401(k), IRA, Roth IRA, CD, annuity, etc., are not fully-accessible money, yet they are growing.

•  Zakah must be calculated based on the following formula:

 

 withdrawable amount – prescribed penalty – prescribed tax = zakatable amount

 

By “withdrawable amount,” I mean the amount you are allowed to withdraw, even if you have not actually withdrawn it in reality.