View 1: zakatable every year
On this view, the account is wealth you own, so it enters your annual calculation like any other asset. The twist is the number used: zakat is due on the accessible value — what the account is worth minus the tax and penalties that would be owed if you withdrew it today.
Many North American scholars teach this view for voluntary accounts, where the saver chose to put the money there and could — at a cost — reach it.
View 2: zakatable on receipt
On this view, money you cannot actually get to is not yet zakatable wealth. Nothing is due while the funds are locked away; when you can finally access them, you pay one year of zakat on receipt.
Both views are put forward by serious scholars. The practical difference is timing: smaller annual payments now, or a single larger payment later.
What to do in practice
Whichever view you follow, do the arithmetic on your zakat date like any other asset. If you follow view 1, find the current balance, estimate the tax and penalty hit, and add the remainder to your zakatable total.
Note the employer and plan rules differ by country; a scholar familiar with your scheme can tell you how the two views map onto it.
A worked example under view 1
A 401(k) balance of $40,000, with an estimated $8,000 lost to tax and penalties if withdrawn today. The accessible value is $40,000 − $8,000 = $32,000.
Zakat: 2.5% × $32,000 = $800 for the year — added to the zakat on the rest of the saver's wealth.
Frequently asked questions
Do I pay zakat on my 401(k) every year?
It depends on which view you follow. View 1: yes, each year on the accessible value (balance minus tax and penalties). View 2: no, nothing until you can access the funds, then one year of zakat on receipt. Many North American scholars teach view 1 for voluntary accounts.
What about IRAs and workplace pensions?
The same two views apply to IRAs, pensions, and similar retirement schemes: zakatable annually on the accessible value, or zakatable once on receipt when the funds become accessible.
Which value do I use if I pay yearly?
Use the accessible value: the account balance on your zakat date, minus the estimated tax and penalties you would pay to withdraw it now. That figure, not the gross balance, is what view 1 treats as zakatable.
Can I just wait until retirement and pay once?
That is view 2, and it is a legitimate position — but it is a choice between two scholarly views, not a way to avoid zakat. Decide with a scholar, and if you miss years under either view, missed years remain due: estimate honestly and pay them.