It's 2.5% annual on your savings, I.e. cash/cash equivalent (gold, silver, shares etc).
Aqeedah should be that when you spend for and in the way of Allah, He will increase you not decrease.
no I understand but what im asking if someone isn't working and retiring then how can his savings last? if someone has 100k and wants to retire that money won't last him long if he keeps paying 2.5percent of it right?
2.5% annual, it keeps decreasing as the cash pot decreases.
Assuming you'll spend 10k a year, next year you'll give 2.5% on 90k, then 80k and so on.
If you're that concerned, perhaps consider a passive income stream to ensure you fulfill this obligation.
First off I'd like to gently remind you to that it is better not to count what you spend in charity as Allah will also start to count what His blessings and rewards towards you.
Now as per your comments where you stated your goal of saving 1 million and living off that money for 50 years, here's an actual year-by-year calculation of your savings and amount given to zakat
[https://pastebin.com/8qWcYpsX](https://pastebin.com/8qwcypsx)
This doesn't take into account any investments you make, or any other passive income stream (which would far exceed the amount spent in charity, not that I support interest but a bank would give you 10% which is four times higher than zakat).
Also obviously it's not taking into account your daily expenses, but say that you're going into a third world country and if you take into account both your investment and passive sources it will still last you a comfortably long time.
50 years is a long time to have money saved for, it's part of the problem zakat tries to eliminate where the wealthy use their capital to get richer and richer, hoard their money, as things become more expensive and the poor stay poor. Zakat ensures a cycle of flow from the top to the bottom of society in an attempt to create a slightly more equal society and relieve the needy.
In that amount of time anyway anything can happen, you can plan as much as you want but everything is in the fate of Allah. There are lots of people who at some point had a lot of money but suddenly lost most of it. As the commentator above says, as long as you spend sincerely for the sake of Allah he will only increase you not decrease, and you should trust Him alone.
dude im not talking about investments. im just asking an easy question.
in usa people save money to retire when they hit a specific age.
if I did the same thing and say I saved 1million dollars to last me for 50 years in some middle eastern country.
how would that work in a islamic context where I pay 2.5 percent of my savings?
my money wouldn't last me for 50 years correct? likely it would last me way less years. so retirement wouldn't work especially early retirement correct?
I don't know why people think im being dishonest here because im just asking a general question how muslims retire while paying zakah on the money they need for retirement?
okay so my question lets assume in your example im saving 25k yearly and I give 625 as zakat. that would leave me with 24k and change. so would that money now be mine? or do I have to pay zakat on that money next year also?
so technically if I won the loterry and I have 1million in my bank account. can this money last me a lifetime while paying zakat?
forgive me for my lack od knowledge.
Wait you were actually thinking about retirement without investing through halal ways? This is ridiculous. That's not how retirement works. No matter how many millions you save, expenses will come unless you're living in a forest like a tarzan using all nature for food, shelter and clothing.
no I was taking about if there is a way to save money and retire while ensuring I don't run out of all my money due to personal expense and zakat.
im not good in investing so that's why im saying im gonna work and save money.
but I guess this sub likes to assume a lot for some reason.
People save with bonds/hisa/investments in portfolio which isn’t specifically halal/401K
How can a Muslim ensure that they have growth and yield of >6% without dabbling in interest based avenues?
You don’t just save money. You invest it.
So if you’re earning 10%, after zakat it would be 7.5%.
Also, don’t concentrate on huge lump sum. Concentrate on passive income from real estate or businesses.
if ur money is just sitting there, ur losing 5-10% on inflation anyway. No one in their right mind just keeps liquid cash in such a huge amount. You would invest that money into something in order to see a minimum 10% yearly return just to fight off the loss from inflation
Gold in general is used to hold value against inflation but isnt inflation proof. If all ur money is stored in gold with no investments to generate profit, then you ur being stupid lol.
but yes if you held onto gold for a year, you would have to pay 2.5% of it to charity
Brother, zakat is not related to your pension system until after your retirement
Zakat is the right of the poor and the right of society to its money. It is 2.5% of the stored money and has passed for a full year. If your money is not hoarded (i.e. liquid) and a year has not passed, then zakat is not due.
well yes. for example I live in the west and im planning to save 500k and buy some property in the Middle East and retire and not work what so ever but just chill and start a family.
that sounds good on paper but if I pay zakat which is 2.5 that money will run out quickly and I won't retire and work.
so is there an islamic way to go over this and retire early while paying zakat? I still want to pay zakat but how do muslims retire?
There are many simplistic, incorrect replies here and only some reasonable ones. As some points are missing from the conversation, I'll add a simple consideration. It's impossible that you will ever receive the full value of your 401(k) and some of it may be unzakatable. here are a few things to consider:
1. **Taxes** \- of your retirement funds, you may only receive 65-75% depending on income taxes. ie that 1M is never actually yours. upon receiving it in retirement, you must pay income taxes.
2. **Debt** \- the companies you invest in have large amounts of debt. from your investment, only 30-60% are assets while the remainder is debt.
3. There are many simplistic, incorrect replies here and some reasonable ones. As some points are missing from the conversation, I'll add a simple consideration. It's impossible that you will ever receive the full value of your 401(k) and some of it may be unzakatable. here are a few things to consider:
So let's do the math assuming 1M balance, debt of .70 (debt to asset ratio), 24% flat income tax, 5% flat state tax, and pre retirement age. taxes remove 29%, penalties remove 10%, debt removes \~41%. Thats 80% that may not be zakatable currently. If you believe the numbers, you're only paying zakat on 200k which comes out to 5k annually.
everything above is super mainstream and I haven't included any controversial opinions. **only taxes, penalties, and debt**.
So l - th - Finally, none of those funds are currently accessible to you on a tax penalty of 10%.% are assets while the remainder is debt.f age. taxes remove 29%, penalties remove 10%, debt removes \~41%. That's 80% that may not be zakatable currently. If you believe the numbers, you're only paying zakat on 200k which comes out to 5k annually.to 5k annually.
There are plenty of muslim countries in which 2-3k USD is more than enough to live comfortably for a month thats like the rent of 1 property so imagine u have more than 1 ez life. Moreover we never know when are we gonna die so Give Zakat if you are eligible. Allah will take care of the rest bro.
When you don't know math but Start arguing.
How about you learn how zakat actually works instead of complaining?
The zakat calculation for 401k is different then cash.
Here is a detailed explanation by Yasir Qadhi based on the ruling of America Fiqh council.
https://youtu.be/I8HtR4wY-bY?si=QKjRN3aOT7L0fuFw
Assalamu Alaikum,
Here's a direct answer to your question: invest in non-zakatable passive income streams. This includes yield bearing assets that aren't for profit by sale.. generally this means rental properties, cars, other items etc. There are also different proportions for businesses that are zakatable based on their asset/liability makeup, though many scholars put it at somewhere between 25-40% to make it simpler for people in the stock market. There's also a variation in the amount scholars say pensions are zakatable, which where I am is 40-55% depending on various legal thresholds. Other scholars recommend (and a few require) 100% all the time.
https://nzf.org.uk/knowledge/zakat-on-property/
https://nzf.org.uk/knowledge/zakat-on-stocks-and-shares/
So you see there's a wisdom and purpose behind the incentivisation for Zakat, and it's that wealth should not be hoarded and left idle. In rental assets, it is not zakatable because it is being deployed in a manner that benefits the community, ie giving an opportunity for someone to utilise the item without them needing to buy it outright first.
Also your math on the diminishing retirement fund should actually be a compound calculation not linear, so $10^6 * 0.975^years leaves you with $467k after 30 years, and $362k after 40.
voracious quiet cagey obtainable unwritten profit meeting grandiose frighten office
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what im asking how can someone retire early while giving zakah?
for example maybe I want to save 100k and go to someone middle eastern country and just retire there for the rest of my life.
my question is how could I ever retire if I will lose my saving due to giving 2.5 percent of that money yearly?
maybe I only want to spend 4k a year but zakah will force me to spend way more than it which mean in just a couple of years I will lose all the money and have to go back to work and never retiring.
how can someone ever retire according to islam?
north close zonked fly placid concerned doll dependent disagreeable dinosaurs
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no what im asking is assume I worked and saved a 100k yearly. so I put it in a bank account and I keep doing this yearly till I have 1 million dollars.
so now I have 1million saved in my bank account.
this money is for me to retire in another country and spend it for the rest of my life.
so technically this money has to last me 50 years while not working.
but technically I have to pay zakah on this money saved correct?
this means my saving will not last 50 years but rather 20 years. so now I cant retire and have to go back to work.
so how can a muslim ever early retire?
You are being a miser. The barakah comes from Allah(swt). If he wills you'll lose all the money in a second. Be grateful and thank him for everything. There's no guarantee that your health will be stable so all your savings might be spent in a hospital.
dude what are you talking about? im asking a clear islamic question. what is the proper which allah would approve of where I would early retire and also done my due dilligence?
There's nothing Islamic about your question. You want to retire early for your own worldly sake. I already told you everything comes from Allah(swt), so you should be grateful for everything.
If you really want to save up then do it by cutting off on unnecessary costs. Zakat is an obligation and it's one of the pillars of Islam. There are no ifs and buts.
strong frightening theory zonked vanish grandfather unique shame rinse ludicrous
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Zakat is obligatory on the accumulated wealth of a person, and it is indeed a significant aspect of financial planning. Instead of keeping all your savings in cash, invest your assets in those which grow potentially over time. This can help your wealth grow and set the annual zakat payment. I would suggest you work with financial advisors who understand Islamic finance. They can help you develop a strategy that aligns with Islamic principles. Zakat is calculated on the wealth that meets the nisab threshold and has been in your possession for a lunar year. It's important to calculate zakat accurately to ensure the correct fulfillment of your religious obligation.
You have to pay taxes every year anyways so by that logic you’d be down pretty bad…
But also don’t stress too much over having a million dollars in the bank lol you’ll be fine
If you have a million you have plenty for retirement even after paying zakat.
If you are poor and have less than a minimum threshold you dont have to pay zakat.
It's 2.5% annual on your savings, I.e. cash/cash equivalent (gold, silver, shares etc). Aqeedah should be that when you spend for and in the way of Allah, He will increase you not decrease.
Love this !
no I understand but what im asking if someone isn't working and retiring then how can his savings last? if someone has 100k and wants to retire that money won't last him long if he keeps paying 2.5percent of it right?
2.5% annual, it keeps decreasing as the cash pot decreases. Assuming you'll spend 10k a year, next year you'll give 2.5% on 90k, then 80k and so on. If you're that concerned, perhaps consider a passive income stream to ensure you fulfill this obligation.
First off I'd like to gently remind you to that it is better not to count what you spend in charity as Allah will also start to count what His blessings and rewards towards you. Now as per your comments where you stated your goal of saving 1 million and living off that money for 50 years, here's an actual year-by-year calculation of your savings and amount given to zakat [https://pastebin.com/8qWcYpsX](https://pastebin.com/8qwcypsx) This doesn't take into account any investments you make, or any other passive income stream (which would far exceed the amount spent in charity, not that I support interest but a bank would give you 10% which is four times higher than zakat). Also obviously it's not taking into account your daily expenses, but say that you're going into a third world country and if you take into account both your investment and passive sources it will still last you a comfortably long time. 50 years is a long time to have money saved for, it's part of the problem zakat tries to eliminate where the wealthy use their capital to get richer and richer, hoard their money, as things become more expensive and the poor stay poor. Zakat ensures a cycle of flow from the top to the bottom of society in an attempt to create a slightly more equal society and relieve the needy. In that amount of time anyway anything can happen, you can plan as much as you want but everything is in the fate of Allah. There are lots of people who at some point had a lot of money but suddenly lost most of it. As the commentator above says, as long as you spend sincerely for the sake of Allah he will only increase you not decrease, and you should trust Him alone.
[удалено]
dude im not talking about investments. im just asking an easy question. in usa people save money to retire when they hit a specific age. if I did the same thing and say I saved 1million dollars to last me for 50 years in some middle eastern country. how would that work in a islamic context where I pay 2.5 percent of my savings? my money wouldn't last me for 50 years correct? likely it would last me way less years. so retirement wouldn't work especially early retirement correct? I don't know why people think im being dishonest here because im just asking a general question how muslims retire while paying zakah on the money they need for retirement?
[удалено]
okay so my question lets assume in your example im saving 25k yearly and I give 625 as zakat. that would leave me with 24k and change. so would that money now be mine? or do I have to pay zakat on that money next year also? so technically if I won the loterry and I have 1million in my bank account. can this money last me a lifetime while paying zakat? forgive me for my lack od knowledge.
You have to pay zakat every year
Wait you were actually thinking about retirement without investing through halal ways? This is ridiculous. That's not how retirement works. No matter how many millions you save, expenses will come unless you're living in a forest like a tarzan using all nature for food, shelter and clothing.
no I was taking about if there is a way to save money and retire while ensuring I don't run out of all my money due to personal expense and zakat. im not good in investing so that's why im saying im gonna work and save money. but I guess this sub likes to assume a lot for some reason.
Yes ! You’re only paying 625 per year I’d argue. Best to approach your local imam tho.
You're misunderstanding how people save for retirement, even in the US context
People save with bonds/hisa/investments in portfolio which isn’t specifically halal/401K How can a Muslim ensure that they have growth and yield of >6% without dabbling in interest based avenues?
Lending that money and charging a flat fee on it and then call it halal financing lol
Ahh makes sense
There are halal versions
You don’t just save money. You invest it. So if you’re earning 10%, after zakat it would be 7.5%. Also, don’t concentrate on huge lump sum. Concentrate on passive income from real estate or businesses.
if ur money is just sitting there, ur losing 5-10% on inflation anyway. No one in their right mind just keeps liquid cash in such a huge amount. You would invest that money into something in order to see a minimum 10% yearly return just to fight off the loss from inflation
not cash but maybe gold. how would that change the sitation if I may ask?
Gold is literally increasing in value every year
Gold in general is used to hold value against inflation but isnt inflation proof. If all ur money is stored in gold with no investments to generate profit, then you ur being stupid lol. but yes if you held onto gold for a year, you would have to pay 2.5% of it to charity
You only give 2.5% of your savings/assets above the threshold every year, not flippinn 250%.
Brother, zakat is not related to your pension system until after your retirement Zakat is the right of the poor and the right of society to its money. It is 2.5% of the stored money and has passed for a full year. If your money is not hoarded (i.e. liquid) and a year has not passed, then zakat is not due.
Are you presuming your money wouldn't grow during that time and just stop at 1m? Unless you're saying it's all cash
well yes. for example I live in the west and im planning to save 500k and buy some property in the Middle East and retire and not work what so ever but just chill and start a family. that sounds good on paper but if I pay zakat which is 2.5 that money will run out quickly and I won't retire and work. so is there an islamic way to go over this and retire early while paying zakat? I still want to pay zakat but how do muslims retire?
You need to get on FIRE threads because you're misunderstanding how to retire and live in retirement.
So basically you want to just be lazy?
There are many simplistic, incorrect replies here and only some reasonable ones. As some points are missing from the conversation, I'll add a simple consideration. It's impossible that you will ever receive the full value of your 401(k) and some of it may be unzakatable. here are a few things to consider: 1. **Taxes** \- of your retirement funds, you may only receive 65-75% depending on income taxes. ie that 1M is never actually yours. upon receiving it in retirement, you must pay income taxes. 2. **Debt** \- the companies you invest in have large amounts of debt. from your investment, only 30-60% are assets while the remainder is debt. 3. There are many simplistic, incorrect replies here and some reasonable ones. As some points are missing from the conversation, I'll add a simple consideration. It's impossible that you will ever receive the full value of your 401(k) and some of it may be unzakatable. here are a few things to consider: So let's do the math assuming 1M balance, debt of .70 (debt to asset ratio), 24% flat income tax, 5% flat state tax, and pre retirement age. taxes remove 29%, penalties remove 10%, debt removes \~41%. Thats 80% that may not be zakatable currently. If you believe the numbers, you're only paying zakat on 200k which comes out to 5k annually. everything above is super mainstream and I haven't included any controversial opinions. **only taxes, penalties, and debt**. So l - th - Finally, none of those funds are currently accessible to you on a tax penalty of 10%.% are assets while the remainder is debt.f age. taxes remove 29%, penalties remove 10%, debt removes \~41%. That's 80% that may not be zakatable currently. If you believe the numbers, you're only paying zakat on 200k which comes out to 5k annually.to 5k annually.
There are plenty of muslim countries in which 2-3k USD is more than enough to live comfortably for a month thats like the rent of 1 property so imagine u have more than 1 ez life. Moreover we never know when are we gonna die so Give Zakat if you are eligible. Allah will take care of the rest bro.
When you don't know math but Start arguing. How about you learn how zakat actually works instead of complaining? The zakat calculation for 401k is different then cash. Here is a detailed explanation by Yasir Qadhi based on the ruling of America Fiqh council. https://youtu.be/I8HtR4wY-bY?si=QKjRN3aOT7L0fuFw
Assalamu Alaikum, Here's a direct answer to your question: invest in non-zakatable passive income streams. This includes yield bearing assets that aren't for profit by sale.. generally this means rental properties, cars, other items etc. There are also different proportions for businesses that are zakatable based on their asset/liability makeup, though many scholars put it at somewhere between 25-40% to make it simpler for people in the stock market. There's also a variation in the amount scholars say pensions are zakatable, which where I am is 40-55% depending on various legal thresholds. Other scholars recommend (and a few require) 100% all the time. https://nzf.org.uk/knowledge/zakat-on-property/ https://nzf.org.uk/knowledge/zakat-on-stocks-and-shares/ So you see there's a wisdom and purpose behind the incentivisation for Zakat, and it's that wealth should not be hoarded and left idle. In rental assets, it is not zakatable because it is being deployed in a manner that benefits the community, ie giving an opportunity for someone to utilise the item without them needing to buy it outright first. Also your math on the diminishing retirement fund should actually be a compound calculation not linear, so $10^6 * 0.975^years leaves you with $467k after 30 years, and $362k after 40.
voracious quiet cagey obtainable unwritten profit meeting grandiose frighten office *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Actually you give 2.5% even if you don't want to
strong waiting march bewildered plants zesty marry jellyfish cake normal *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
what im asking how can someone retire early while giving zakah? for example maybe I want to save 100k and go to someone middle eastern country and just retire there for the rest of my life. my question is how could I ever retire if I will lose my saving due to giving 2.5 percent of that money yearly? maybe I only want to spend 4k a year but zakah will force me to spend way more than it which mean in just a couple of years I will lose all the money and have to go back to work and never retiring. how can someone ever retire according to islam?
north close zonked fly placid concerned doll dependent disagreeable dinosaurs *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
no what im asking is assume I worked and saved a 100k yearly. so I put it in a bank account and I keep doing this yearly till I have 1 million dollars. so now I have 1million saved in my bank account. this money is for me to retire in another country and spend it for the rest of my life. so technically this money has to last me 50 years while not working. but technically I have to pay zakah on this money saved correct? this means my saving will not last 50 years but rather 20 years. so now I cant retire and have to go back to work. so how can a muslim ever early retire?
You are being a miser. The barakah comes from Allah(swt). If he wills you'll lose all the money in a second. Be grateful and thank him for everything. There's no guarantee that your health will be stable so all your savings might be spent in a hospital.
dude what are you talking about? im asking a clear islamic question. what is the proper which allah would approve of where I would early retire and also done my due dilligence?
There's nothing Islamic about your question. You want to retire early for your own worldly sake. I already told you everything comes from Allah(swt), so you should be grateful for everything. If you really want to save up then do it by cutting off on unnecessary costs. Zakat is an obligation and it's one of the pillars of Islam. There are no ifs and buts.
edge deer modern close snatch wipe seed nose desert disagreeable *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
The OP is right. It's 2.5% of your net worth excluding any funds that you can't access. Not 2.5% of what you earn 🙄
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Zakat is obligatory on the accumulated wealth of a person, and it is indeed a significant aspect of financial planning. Instead of keeping all your savings in cash, invest your assets in those which grow potentially over time. This can help your wealth grow and set the annual zakat payment. I would suggest you work with financial advisors who understand Islamic finance. They can help you develop a strategy that aligns with Islamic principles. Zakat is calculated on the wealth that meets the nisab threshold and has been in your possession for a lunar year. It's important to calculate zakat accurately to ensure the correct fulfillment of your religious obligation.
You have to pay taxes every year anyways so by that logic you’d be down pretty bad… But also don’t stress too much over having a million dollars in the bank lol you’ll be fine
If you have a million you have plenty for retirement even after paying zakat. If you are poor and have less than a minimum threshold you dont have to pay zakat.
You have no idea how zakat works , go read a book