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Enrolling in 401K Plan with Restricted Options

Answered as per Hanafi Fiqh by ShariahBoard.org

Assalamualaikum Warahmatullah 

I hope that you are in the best state of eeman and health when you receive this message. My company provides a 401K plan but all the options are restricted in the sense that I do not know where the money is going to be invested. I have called my company as well as the company which manages the 401K portfolio and there is no way to manage the portfolio myself or invest somewhere based on my choice or preference. Whatever they invest in (even if it is a haram business such as a brewery), they will invest my money in as well.

In this situation and is it permissible to invest in such a a 401K plan? Or should I completely not participate to be on the safe side.

I would appreciate your insight in this matter.


Enrolling in 401K Plan with Restricted Options

Walikumassalam Warahmatullah

الجواب وباللہ التوفیق

Firstly we do not have knowledge of the company, their method and areas of investments in which they use this money and in the light of other similar questions certain conditions in these types of accounts are deemed Un-Islamic. For example, you cannot take this invested money back until a certain point in time and in case you request to take it back you are faced with paying penalties and taxes. The second thing mentioned in your question is that the money can be invested in any business or investment opportunity, whether halal or haram, and you will not have knowledge of where the money actually has been invested. In principle, one of the basic conditions to get involved in an investment opportunity is to ensure that the money is being invested in a halal business. Additionally, such companies are usually not free from interest based transactions either, therefore, the cause for permissibility of such investment does not seem valid. It will be better to ask the question again by providing all the relevant details.

واللہ اعلم ابالصواب

This answer was collected from Shariahboard.org. It was established under the supervision of the eminent faqih of our era, Hazrat Shah Mufti Mohammed Navalur Rahman damat barakatuhum.

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