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Are 401K Plans permissible?

Question:

Assalamoalikum

I wanted to ask if putting money in the 401K offered by Employer here is Texas is Halal? I heard 401k can be from stocks in beer, gambling companies ect. but I don’t have access to where they invest. So in general is putting money in 401k halal or haram?
JazakAllah
Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

The ruling of a 401K Retirement Plan depends on the nature of the Funds in which the contributions are invested. If the contributions are invested in a Shariah Compliant Fund, the proceeds are permissible. And if the contributions are invested in a non-Shariah Compliant Fund, the proceeds are impermissible.

Normally, the employee has the option to choose where the contributions will be invested. If there are Shariah Compliant Funds available in one’s company, then the employee should choose such Funds. However, if the company does not offer any Shariah Compliant Funds, then one should make a request for Shariah Compliant Funds.

If the money was invested in a Fund by the employer without the knowledge of the employee, the employee should make investigations to find out regarding the Shariah Compliancy of the Funds wherein the contributions were invested.

For further details on the ruling of a 401K Plan, kindly see the following link:

http://www.albalagh.net/Islamic_economics/0073.shtml

And Allah Ta’āla Knows Best

(Mufti) Abdul Azeem bin Abdur Rahman

 

Disclaimer:

 

The Shar’a ruling herein given is based specifically on the question posed and should be read in conjunction with the question.

 

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