Dear Hadi,
For all of my adult life, I have paid Zakat as 2.5% of my saved assets. I am approaching retirement and have developed concerns about how to pay zakat in the future.
After retirement, my income from my salary will become zero. If I continue paying 2.5% zakat on savings every year the retirement account will be seriously depleted
After a few years, I may not have enough money for expenses – What do I do?
Keep on working?
Please advise.
Dear Want to Retire,
Salaamu Alaikum.
Thank you for your question.
This question concerns zakat, fiqh, and fatwas, which we don’t generally handle in this advice column.
However, the question you asked is very important, as it affects so many Muslims.
Significant opinions on the matter have not yet reached the Western Muslim audience. Consequently, these options are not generally reflected in fatwas or zakat calculators used in the USA.
Therefore, we would like to answer your question, not by way of a fatwa, but to at least mention some relevant options.
You can do additional research and seek formal fatwas from the various sources available to the American Muslim community.
The traditional view, as you have mentioned, is that you pay 2.5% of your wealth, which, in your case, is your retirement savings.
Once you take ownership of the retirement account, as long as your wealth exceeds the minimum amount on which zakat is due (technically called the nisab, and defined as the equivalent of 85 grams of gold).
As an aside not relevant to your question, we have always been quite perplexed that the nisab amount has not been updated to some modern value, such as something indexed to the “poverty line” in each nation, etc.
About your question, we note that Sheik Abd Allah Mashad, a former grand mufti of Al-Azhar in Egypt, dealt with precisely this concern a few decades back.
He issued a fatwa that many Muslims now use to fulfill their obligation of zakat without depleting their retirement accounts to the point that they cannot meet their living expenses.
Basically, the idea is to treat your retirement account as if it were a fixed, unbreakable asset, such as a piece of agricultural land that yields crops annually.
This land is not sold off to pay 2.5% of its value, but rather, the zakat is calculated annually as 10% of the crop yield.
Therefore, Sheik Al Mashad reasoned that every year, one could pay 10% of the income generated by the retirement account rather than 2.5% on the entire account.
Here’s a link to an English internet article that fully explains the reasoning behind this fatwa: https://makingsenseofislam.medium.com/thoughts-on-zakat-c1e57203569d, and here is a link to a video (in Arabic) on the topic: https://vimeo.com/848149689/bd268b6554.
It is up to you, of course, whether you want to take this fatwa or not, whether you consider this retirement account to be truly all the money you have to live on, and so you can apply the fatwa to it, etc.
That is out of our scope, but we just wanted to inform you and our readers that this is an opinion that exists. It has become somewhat standard in some quarters since it is quite rare to hear it discussed.
We believe that the fiqh needs to be in a state of constant reappraisal and renewal to meet the aims of the sharia and fulfill the spirit of the Divine Law.
Certainly, paying zakat should not be an obligation whose endpoint would be to impoverish the payer, and God knows best.
That reappraisal and renewal, of course, needs to be done by qualified specialists in Islamic jurisprudence and the relevant secular discipline where new fatwas are being offered.
We stress that we are not one of those people.
However, we have tried to pass on some relevant information that may be helpful to you.
In peace.