Do I Have To Pay Zakat On Money Saved For Retirement?
Greg, I went through the same arguments in my head as you. There are problems with every approach. If you say there is no Zakat on retirement or Children’s wedding, or education, then who would set the maximum limit on these and how? Similarly, the concept that there need to be no Zakat on investments, exempts all rich people from Zakat as they always keep their money invested or in personal use. Putting Zakat on all assets including investments each year doesn’t make sense. My Ijtihad is to look at the purpose of Zakat. It is to move money from rich to the poorest of poor to help them and to eliminate severe poverty. Also to put money in circulation from bottom up, rather than just between rich people. My Ijtihad is that once Zakat is paid once on earning, then it shouldn’t need to be paid on savings. But then it needs to be paid yearly on you total living expense, total assets in personal use, such as homes, cars, boats, cash in use, living and leisure expense. Also, Zakat need to be paid when money is drawn for Children’s education or wedding. Or money is drawn for personal use, such as retirement expenses. Furthermore, Zakat need to be paid on all assets when a person dies. I think this solution makes things simple and workable in modern economy and also keeps the intended purpose of Zakat alive.