Do I Have To Pay Zakat On Money Saved For Retirement?
Very good question. There could be three scenarios. Either this money is sitting in the bank, invested in liquid investments or invested in non liquid time bound investments. Perhaps a scholar could answer all three scenarios.
I am from India and we do not have 401 scheme here.we plan to invest in mutual funds in sha allah ,so the whole amount will be in our possession and the amount of zakat due will be 4-5 times more than what I pay now when I am earning.
Can you elaborate how saving for eduction is a pre-determined future expense but retirement savings are not? There is no logic in saving for retirement except for the purpose of ones own pre-determined future expected expenses. If you are discussing saving to give an inheritance to kids, I would agree but the entire principle around retirement in the modern western world is to save so that one can care for oneself and ones families needs from the time they stop working whether this be due to age, illness or simply preference as to how they wish to spend their time here. This reasoning must be applied differently to the savings of a 20 year old who is in no way thinking about these expenses with a specific intention and the 40, 50 or 60 year old who has been working decades and is ready to be done and clearly is intentional about exactly what he needs over a given time frame to care for his and his families needs while not working. Clearly you are agreeing that zakat should not deplete education savings and I should see no reason you would not agree to apply the same reasoning to savings which plan for even more fundamental expenses in life such as health care or housing. Thanks
So my solution is that except for people in business, people need to pay Zakat on their yearly pay or agricultural production. They also need to pay Zakat when they draw money from savings for personal use, or for Children’s wedding, education or for retirement expense. They also need to pay Zakat on all assets when they die. People in business need to pay Zakat on their total yearly living expense and on the value of total assets in personal use. They also need to pay Zakat on all their assets when they die.