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View Full Version : is 401k halal or haram?



ayan333
09-23-2009, 11:42 PM
i need to know please
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rpwelton
09-24-2009, 01:16 PM
Depends on the investments, as well as which scholars you follow.

Of course investing in companies that deal in alcohol, gambling and banking, etc is haraam.

Definitely if it invests at all in bonds then that portion of it is haraam. Bonds are securities which pay a fixed or variable "coupon" (interest payment) to the investor periodically, typically twice a year.

Stocks (shares in companies) are a slightly different matter, but it gets a little trickier because nearly all companies finance their operations with riba in some way or another. There are some Islamic finance scholars who will permit investment in a stock so long as the companies debt/equity ratio is less than 33% (ie, less than 33% of their financing comes from riba), although I have no idea where they get this number from and what daleel they have (unfortunately they appear to be the more outspoken bunch of the scholars). Other scholars say no way; we are not allowed to eat something containing 32% pork or 32% alcohol, so why should riba be any different?

I have a finance background, so I'm inclined to agree with the latter opinion, and thus I have suspended by 401k contributions and plan to withdraw all the money and give it away as charity because it's tainted with riba.

BUT, even with that being said you should do some more research on it and find out as much as you can for yourself. Finance is one of the most complex areas for Islamic law because so many of these products did not exist even 50 years ago, so Islamic scholars are just now trying to play catch-up.
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