Fatwa ID: 21964
Title: Zakat on 401K or retirement plan
Category: Prayer
Scholar: Dr. Main Khalid Al-Qudah
Date: 03/22/2006
Question
1. The pension fund controlled by the employer is not available until at least age 59 or until the employee retires. Are these funds subject to zakat prior to access to the fund? 2. The 401K portion (by employee contribution) can be accessed with penalty (with as much as 45% tax and penalty) for paying zakat on the amount. If the fund does not grow for several years or diminishes, paying zakat will essentially deplete the fund more. The original intention of the fund is to protect employee and spouse to protect financially during old age. If the fund is depleted significantly, will zakat be applicable to the fund prior to getting full access to the fund? 3. If the zakat is calculated based on all assets (cash savings, 401K, retirement fund etc) Which turns out to be significant that will cause financial burden to payoff, will the zakat be applicable in the first place?
Answer

It depends on your company,s policy and  the stste,s regulations.

If you can - legaly- withdrow from your account before the due date,then the money is subject to Zakat, and vise versa.If this is the case,you need to  withdrow your money and invest it Islamicaly and pay its Zakat.

Allah Knows best.