can anyone plz tell me whether having a 401K account is legal or not
what about interest payment in a new buying car ?is it allowed or leasing is a better option?
Re: Retirement account and buying car
In my opinion 401K is not allowed and my source is not very strong on this so don't take my words but I would like to give my opinon.
About car I think its better to lease instead of buying on payment because that is for sure involves interest. Infect when you go buy the car they tell you how much interest they are going to charge (APR) unless if they are giving it for 0% APR.
Goodluck.
Re: Retirement account and buying car
why on earth would a 401K be disallowed. lets look at the mechanics of how a 401K works.
you save money on a pretax basis, and invest it, u dont pay any taxes on the earnings until u retire and withdraw..I am not going to go into penalties for pre retirement withdrawls and all.
so is saving money haram, no
is paying taxes haram, no
is deferring taxes haram, no
so what can be the issue? interest? if that is the basic issue then dont invest in money market or bonds, invest in stocks, funds that are 100% stock funds.
now as far as lease versus buy, if you are of the mindset that interest under any other name is still interest and is thus haram then the lease fee (aka implied interest) is similar to interest anyways. so if you are in interest purist then its just as disallowed as financing a car.
Re: Retirement account and buying car
can anyone plz tell me whether having a 401K account is legal or not
what about interest payment in a new buying car ?is it allowed or leasing is a better option?
While buying a car............Please keep in mind one very important consideration.........................
All the roads you drive on...............were built using "BOND MONEY"
So just a precaution....................you may want to consider............:)
Re: Retirement account and buying car
why on earth would a 401K be disallowed. lets look at the mechanics of how a 401K works.
you save money on a pretax basis, and invest it, u dont pay any taxes on the earnings until u retire and withdraw..I am not going to go into penalties for pre retirement withdrawls and all.
so is saving money haram, no is paying taxes haram, no is deferring taxes haram, no so what can be the issue? interest? if that is the basic issue then dont invest in money market or bonds, invest in stocks, funds that are 100% stock funds.
now as far as lease versus buy, if you are of the mindset that interest under any other name is still interest and is thus haram then the lease fee (aka implied interest) is similar to interest anyways. so if you are in interest purist then its just as disallowed as financing a car.
Peace Rebel X
It is consensus that lots of money sitting tucked away doing nothing is not permissible. Haram I don't know, but shunned it is.
The difference in the interest whilst buying the car as opposed to lease is that lease amount is a defined amount that is given and accepted for a given period, but the item never becomes part of the ownership of the one taking the lease. However, the opposite is true for the purchaser.
Re: Retirement account and buying car
While buying a car............Please keep in mind one very important consideration.........................
All the roads you drive on...............were built using "BOND MONEY"
So just a precaution....................you may want to consider............:)
Peace SindSagar
That doesn't justify not avoiding interest as much as possible. We are living in those times when interest is rife, and for those who do not deal in it will be covered in its dust.
We can't avoid it sometimes. But where we can we should try.
Re: Retirement account and buying car
While buying a car............Please keep in mind one very important consideration.........................
All the roads you drive on...............were built using "BOND MONEY"
So just a precaution....................you may want to consider............:)
He's not buying the roads genius!
The roads are public property and using them is his right, and the government is supposed to provide for his right. Its not his problem how the government provides for it.
Re: Retirement account and buying car
aggar kisi raaste mein keecharh hota hai to aam insaan apne kaphrouN ko bacha ke side se guzzar ja ta hai, pachaak se ain beej kicharh mein nahi chal ta :)
i guess the same applies to muslims living in this day and age with regards to interest
Re: Retirement account and buying car
what about interest payment in a new buying car ?is it allowed or leasing is a better option?
Why dont you use Murabaha, if its available where you live, to finance your new car? Its interest free and perfectly halaal.
Re: Retirement account and buying car
I. 401-K
I urge you guppies not to drag 401 into Islamic vs. un Islamic debate. This poor guy seems to be young and most likely just starting his job in the USA. So 401K is really realy important for him. The longer he invests in it, the more money he will have when he retires. You guppies in EU have some retirement savings thanks to the government. However in the USA, there are very few jobs where federally secured pension is provided. So you have to build your own "nest egg" in the USA.
Making 401K Islamic is very easy.
Here is how!
a. Invest in stocks (or stocks based mutual funds).
b. If in doubt, do not put your 401K in bonds and money maket (or mutual funds that are based on bonds or money market).
Benefits of 401K
1. This is one of the best saving option for your retirement.
2. You company most likely will match your contribution upto certain percentage. So that's like earning a bonus.
3. According to money magazine, if you were 25 yo, and started putting $200 a month and stopped when you were 35. Then you will have more than a $ 1 million available when you retire. If on the other hand you were 35, and invested the same amount of money till you retired, then you will only have $400,000 for your retirement.
These numbers could be slightly off, but the point is to start saving for your retirement as early as possble.
4. Tax savings. 401K is pretax. So $200 out of your pocket is really $150 a month after tax (based on 25% tax bracket).
Saving Options beyond 401K
**1. ROTH IRA** If you are saver and max out on 401K then put whatever extra you have in the ROTH IRA. This is post tax and your company doesn't match it. Still it has a lot of tax benefits.
**2. Buy a house **through an Islamic bank and you will save money on rents.
II. Buying a car
a. Check on the web for Islamic car buying OR
b. Lease the car and watch your miles. Or buy extra miles if you thing you'll drive more than what the leasing company is offering.
**Disclaimer: **I hope it helps and do consult a tax adviser and a investment broker for more info . They will help you on the exact nature of your taxes and investment options.
***With peace and love to all
In memory of slain soldiers and officers of Pakistani army
Pakistan Paindabaad.
Re: Retirement account and buying car
^^ And yes do give charity (zakat) according to whatever fiqh you follow.
Re: Retirement account and buying car
Did the prophet and Sahaba collect or pay any taxes? no! Taxes are unIslamic 
Re: Retirement account and buying car
He's not buying the roads genius!
The roads are public property and using them is his right, and the government is supposed to provide for his right. Its not his problem how the government provides for it.
Yes the section of road in front of ones property (even though public has access and right of way) are paid for by the owner, all the utilities i.e. Road and side walk pavement, electricity, Water pipes, Sewer Lines and Phone and Cable are all installed by the contractors using Bond Monies that in turn are paid back through Property Taxes......
Their aint no free lunch Bhai Sahib........what is govt?...
**by the people **
**& for the people **
that is you and me..........not being a smart elec...simply pointing out the facts.......:)
Re: Retirement account and buying car
Peace Rebel X
It is consensus that lots of money sitting tucked away doing nothing is not permissible. Haram I don't know, but shunned it is.
its not doing nothing, its your investments, your nest egg. having savings is not haraam or discouraged.
The difference in the interest whilst buying the car as opposed to lease is that lease amount is a defined amount that is given and accepted for a given period, but the item never becomes part of the ownership of the one taking the lease. However, the opposite is true for the purchaser.
its a defined amount for a given period in terms of purchase as well.
and whether you are paying interest for purchase or interest for usage, you are still paying interest. Now if we go with the idea that interest on usage is allowed then much of the interest we see today should be allowed.
and from a lease perspective you have the buy out option in the end, the fact that you do not take advantage of it is a diff thing, but fact remains that you have an ownership interest if you choose to exercise it.
Re: Retirement account and buying car
Did prohet or Sahaba use the Internet…no so Internet is UnIslamic!
Re: Retirement account and buying car
Peace Rebel X
Please read page 36 …
“… And there are those who bury gold and silver and spend it not in the way of Allah: announce unto them a most grievous penalty. Surah 9:34”
"who piles up wealth and keeps on counting it, thinking that his wealth would make him last for ever. By no means! He will be sure to be thrown into the crushing Fire. And what will make you know what the crushing Fire is? It is the Fire of Allah kindled (to a blaze).”
Surah 104:2-6)
Actually you will find that ALL scholars will say that the intention to save lots of money is discouraged, and some scholars will say saving excessive amounts is prohibited, even after the zakat is given.
The reason for this is that Islam time and again encourages sharing wealth and though requires zakat, it encourages the giving of sadaqah which is more than the basic requirement.
From the book again on page 36 … to emphasise the author writes, quoting a hadith, ref footnote 17.
“My Wealth, my wealth” cries the Children of Adam but alas O Children of Adam! Have you really any wealth except for what you have consumed, what you have worn and what you have donated as sadaqah?
This is clear that saving wealth is discouraged because by giving it away we are eternalising it, not by saving it.
… Now bring your evidence
Re: Retirement account and buying car
its a defined amount for a given period in terms of purchase as well. and whether you are paying interest for purchase or interest for usage, you are still paying interest. Now if we go with the idea that interest on usage is allowed then much of the interest we see today should be allowed.
and from a lease perspective you have the buy out option in the end, the fact that you do not take advantage of it is a diff thing, but fact remains that you have an ownership interest if you choose to exercise it.
Peace Rebel X
Point taken ... It would therefore be advisable to take interest free leases also ... However, I was making a comparison between purchasing and renting.
Re: Retirement account and buying car
Did prohet or Sahaba use the Internet.....no so Internet is UnIslamic!
Peace Rocking vibes
No the unIslamic part of it is how it is used.
Re: Retirement account and buying car
They didn't have retirment accounts in 7th century Arabia because they didn't live long enough to retire. This just points out the major problem when one derives all of God's rules from interpretatons of ancient times and peoples that don't resemble today's society in the least.
Saving for retirment is not acquiring wealth. It is planning for the future. It is common sense. How else is one supposed to live out their golden years if they don't save and plan for it? Even if you want to work until the day you die, your physical or mental abilities may not allow you to do so.
Re: Retirement account and buying car
there is not a single scholar in islam that will say savings is haram. now what is your definition of excessive? this is just funds that one is saving for a time one is unable to work and then will be spending it rather than beg borrow or steal or depend on someone else.
as far as ..evidence.. I hope this is enough..
here you go..
http://www.albalagh.net/Islamic_economics/0073.shtml
http://qa.sunnipath.com/issue_view.asp?HD=1&ID=4348&CATE=5
the link basically explains 401K and how diffinvestments are allowed e.g. stocks and others thata re not, i.e. moneymarket or bonds.
talks about zakat on 401K, ifi t was haram then the scholars will not be going into discussion of zakat but would have said this is not allowed.
this mufti has not declared it haram or disliked but just asked for portfolio mix of the 401k, as that is what is important and not saving in a 401K
http://muslim-investor.com/answers/401k-b.html
another site that does not declare 401k haram or diliked, it also talks about the right investments in the portfolio.
www.instituteofhalalinvesting.com/news/materials/Vol1Issue6July07.pdf
talks about 401k and mutual funds
http://www.masnet.org/askimam_runsess.asp?id=70
scroll down in this one, they call it a useful tool and focus yet again on types of investments
http://www.islamonline.net/livefatwa/english/Browse.asp?hGuestID=zY3hbE
scroll down here and see themuftis words.. he says. “401K is a mere saving scheme. It is of course permissible to save in this way, the matching share given by employer is also permissible to give and take.”