Is Zakat Obligatory on IRA/Retirement Accounts That You Don’t Have Access to Until You Reach a Specific Age

Fatwa ID: 04321

Answered by: Imam Abdul-Malik Sheikh

 

Question

 

Asalaamu Alaikum. Quick question – I know I asked before but need to confirm:: IRA/retirement accounts that you don’t have access to until you reach a specific age- need to be counted towards zakat or not?

 

 

بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم

In the name of Allah, the Most Gracious, the Most Merciful

 

 

Answer:
 

Zakat becomes obligatory when the following conditions are met in a person:

1- Being in a state of Islam
2- Maturity (not obligatory on children)
3- Sanity
4- Possession of Nisāb
5- And the Nisāb being in one’s Poseidon for a full lunar year

In addition to the above, the following conditions need to be met with regards to the wealth:

1 – Ownership. Zakat is not obligatory on wealth on does not own
2- Ability to use the wealth
3- Growth
4- Excess over basic needs

My understanding is that the IRA is a type of investment plan in which there is growth and a person with such a plan has legal ownership of the saving even though he is unable to withdraw the money before a certain time without incurring a financial penalty. Therefore, Zakat will be due every year as long as the total amount meets the Nisab threshold.

Reference:
Bada’i al-Sana’i, Vol.2 p.10, Dar al-Kutub al-Ilmiyyah

 

 

Only Allah knows best

Written by Imam Abdul-Malik Sheikh

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

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