Home » Hanafi Fiqh » Askimam.org » Query Regarding 401k

Query Regarding 401k

Answered as per Hanafi Fiqh by Askimam.org

I live in the US. My former employer deposited $3090.18 into a 401k in my name as part of my compensation over the course of 2 years ($1001.22 in 2012 and $2088.96 in 2013). This money was invested into a company stock fund and a real estate investment trust fund. The funds were not Shariah compliant. The money grew to $3500. When I left my company, they “rolled over” the $3500 into a cash Investment Retirement Account (IRA) in my name. The money is still in this account today. If I withdraw it before I turn 59.5 years old, then I will be subject to income taxes in addition to a 10% penalty ($350). 

  1. Is this money halal?
  2. If it is not halal or a portion is not halal, how should I dispose of it accounting for the taxes and penalty?
  3. If it is halal, can keep this money in the IRA and invest it in halal assets like physical gold (I would have to pay storage, transaction, and IRA management fees) or should I withdraw it and pay the penalty? 

JazakAllah. 

Answer

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

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

There are many different types of 401k plans. Please forward us the details as to what type of 401k plan you have, so we can advise accordingly. You may forward your response to admin@daruliftaa.net.

And Allah Ta’āla Knows Best

Abdullah Ghadai

Student Darul Iftaa
Michigan, U.S.A 

Checked and Approved by,
Mufti Ebrahim Desai.

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

Read answers with similar topics: