Dr.Monzer Kahf, a prominent economist and counselor states:

  1. Shares are subject to Zakah at market price on the day when Zakah is due, the day when a Hawl (one lunar year) passes on the Zakatable items that one owns. The rate is 2.5% and this is repeated every year.
  2. Investment in retirement funds is also subject to Zakah. But what one pays as a social security tax is not subject to Zakah although that gives us the benefit of a pension late at retirement. The difference is: Money is one’s retirement fund account is ours and we are rich by it although the government puts certain restrictions of our accessibility, while in a social security system we do not get our money back but we are paid according to the law a pension or family members are paid death benefits.

If you are not given any choice to invest funds in your retirement account other than just placing it on interest in a bank, you may do that but all interest (you do not deduct anything to compensate for inflation or taxes you pay to government) must be given away to Muslim charity or directly to poor and needy when you withdraw money from the account, this is why you need to keep record of this interest that accumulates on this account.”