Do I Have To Pay Zakat On Money Saved For Retirement?
10% Zakat on the money someone saved after paying Zakat on the original income. Wouldn’t the retirement savings be left half in about 10 to 12 years? If I understood it correctly, the invested money does not incur Zakat. Perhaps someone saving for retirement need to put the retirement money in a time bound investment and not keep as cash.
With all due respect I feel this response fails to account for a number of important practical issues, most importantly that this discussion is around retirement savings- the entire principle and intention of retirement savings is to pay for the basic needs of oneself and ones family while one is not working. The question then must be answered whether that saving is somehow in excess of ones needs- if the answer is that these savings represent a reasonable amount to meet the basic living expenses in the time and space intended (not Arabia 1400 years ago- but today in America with health care costs etc) then how can one justify continually depleting what is necessary for this person to provide for himself and his family in years he is not working? 2.5% is a heck of a lot in a year on year basis- the idea that it takes 600 years is not practical to our reality as very soon in any major city in the US you are below what one needs to even live for one year. What about the person who is sick or injured who saved 3M for his retirement and needs this to live the next 30 years to fulfill his obligation to his family and not burden others? Or even the person who decided to stop working with 3MM saved feeling he can be of more benefit to his family, society and Allah using his capital to Live rather than continuing to work. Let’s say these people need to live 30 years and plan that they can do so in a US city like San Fran for 99k a year . With the principle that zakat is due on the entirety of these funds every year you will see that the expected 99k of spending in the first year actually becomes 174k – the second year becomes around 170k, the third year becomes 165k. He will have owed 222k over the first 3 years of retirement for zakat, and spent over 17% of his money already. No longer is this person able to care for his and his families needs but he will eventually be a burden to others. I don’t see how this logic is within the Islamic tradition and the broader principles governing zakat. Thanks