AskImamDarul Iftaa Mahmudiyyah (AskImam)

How do I pay Zakat on a 401(k) plan?

Fatwa 2011English
FastingRamadan

Question

In the US there is a retirement program called 401(k) plan. How do we pay Zakat on the 401(k) plan since it is not in out posession till the age of 59 1/2. Details regarding the 401(k) plan. Upto 10% of a persons pay check before tax can go automatically into the 401(k) plan. This amount cannot be withdrawn from until the person reaches the age of 59 1/2. Then whatever amount is taken is taxed. Now in many cases the amount in the 401(k) which is usually kept in stocks of various companies can grow very fast and a person making a salary of $40,000 may have $500,000 in his 401(k) plan. Since money cannot be taken out of the 401(k) plan how do we pay Zakat? Should we calculate the amount in our account and keep a record and pay when we can withdraw it. If this is the case should we deduct tax each year from our calculations. This question is asked by many people therefore kindly please give a detailed answer as will it will help many others. Jazakallah Khairan.

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

See Ask Imam #29670 for how to pay Zakat on a 401(k) plan.

And Allah Ta’āla Knows Best

Mufti Ebrahim Desai

Answered by
Mufti Ebrahim Desai
View original Ask AskImam directly

Fatawa SA is an independent, read-only index of fatawa already published by Darul Iftaa Mahmudiyyah (AskImam). It is not a fatwa service. For your own situation, ask the issuing Darul Ifta directly.