This may sound like a simple question but it takes an expert in both Islamic law and modern finance to answer it. So I knew who to ask; Shaykh Joe Bradford has a graduate degree in fiqh and ten years of professional experience in banking and finance. This is his answer:

Photo by Scott Graham on Unsplash

“I advise my clients not to pay Zakat on their 401k if they are younger than 59.5 years of age. The reasons for this are as follows:

  • Zakat is only due on wealth that is fully accessible to and actively managed by its owner
  • Zakat is not due on wealth that is inaccessible, illiquid, lost, or that cannot be accessed without penalty
  • 401k plans are not actively managed by the employee and are subject to a penalty if withdrawn before the employee is 59.5 years old

Therefore, I advise that 401k accounts are not liable for Zakat if the account holder is younger than 59.5 years of age.”

With so much financial uncertainty during a lockdown, your Zakat can make a global impact this Ramadan. LaunchGood has hundreds of scholar-verified Zakat campaigns. You could help provide food, shelter, and medical aid to displaced people of Idlib, basic necessities to those affected by COVID-19 in your local community, or a safe haven for special needs children in Afghanistan.

May Allah purify your wealth and place much barakah in it, Ameen!

Zainab Husain is the Director of Business Marketing at LaunchGood | Passionate about platform growth | Zakariya's mama | my coffee machine is my favourite co-worker