This is a question that we’ve received.

Salaam

First off I’m working in Canada and because of this I’m having to pay a lot of taxes as I’m not married

So one way for me to save is by giving to charity which helps but however I’ve heard it’s good to put a part of it towards rrsp.. so im not taxed for it…

Now I know that I’ll have money added to the funds ( I think its interest) when I put them towards RRSP …

can I just have that accumulate and then I give it to charity or are we not allowed to accumulate any sort of interest at all??? Even if we don’t pocket it…

The only reason I want to add funds towards rrsp is that I can save on taxes now and if there’s ever a time that I’m not working I can then cash it out without being penalized for taxes..

Please advise

Jazakallah

[sign name]

Wa alaikum assalam

Jazakum Allahu khairan for your dua, and thank you for subscribing to HalalBucks mailing list.

May Allah reward you for your concern about Halal income. As the authentic Hadith said, one of the questions that one will be asked on the judgment day is, “عن ماله من أين اكتسبه وفيما أنفقه How did you earn your money and how did you spend it?”.

Before answering your question, please know that (as of now) HalalBucks has no scholars nor financial experts on board. We simply use alternative wisdom to share lesson learned from our success and failure.

So, for your question, I once struggled with the same issue that you are asking about (using retirement funds to save taxes). I advise you to stay away from any interests regardless of the purpose.

So, regardless if it’s Halal or Haram, it’s not a good idea for wise people (especially Muslims). Why?

1. Retirement funds are designed for fund managers to tab into a huge pool of money of hard workers who have no time to invest themselves. Read Robert Kiyosaki
2. The idea of tax deferment is sold to you on the assumption that your future tax is lower (which in many countries is not probable due to long term government obligations.)
3. The total tax saving is not worth your hassle (in many countries). That’s why most rich people work their money instead of using these retirement funds.

As for saving taxes according to financial experts, the best way is to start a business. You can check the advice of financial experts who have appeared on the Oprah Show and also the books of Robert Kiyosaki, e.g. Rich Dad, Poor Dad.

So, start a business and invest your money NOW, as you earn it. You will generate greater benefit to the Muslim community, inshaAllah, than your tax saved. Even if you lose your money in a business, Allah forbid, at least you have developed the community to rely on Allah the real provider.

As for Halal and Haram, Allah (subhanahu wa taa’ala) didn’t ask us to use Haram methods to reduce our taxes. Just like some Muslims take a Haram mortgage and claim that they are donating the saved taxes, that is totally ridiculous. You can ask any conservative scholar and they will tell you it’s Haram.

Finally, I’d like to remind you of the authentic Hadith, “من ترك شيئا لله ، عوضه الله خيرا منه Whoever leaves something for Allah, Allah will compensate him with something better.”

And Allah knows best

Disclaimer: We are no scholars nor financial experts. Consult a professional before making your decisions.

Tags: 401k, ira, retirement, tax