QUESTION: What is the consensus on 401K / IRA retirement accounts which are offered through employer benefits and we have the options to participate. Majority of the funds include financial institution.

CATEGORY: RETIREMENT
SUB CATEGORY: 401K / IRA

Time: Thursday December 10, 2009 at 11:01 am

A: if it is non-voluntary, then make sure your money is invested in that which is halal. The percentage of haram money/earnings must be deducted and given in charity without the intention of reward.

If you have a choice regarding 401K, then in such an instance, your money cannot be placed in avenues of haram. Allah (SWT) states in the noble Quran: Eat from that which is pure and do good deeds. Good deeds cannot be reaped with haram earnings.

In light of the current economic trend, it would be futile for Muslims to invest their halal hard earned monies in areas of doubt. For a Muslim to destroy their wealth in such  manner would be forbidden.

Pay your zakat on all money invested. Best to pay it each year.

Allah Certainly knows best.

p.s. as for IRA, send us details about it. This answer is only for the 401K.