401k/IRA/Roth

[mcp293]

Salam

I have a 401k through Fidelity from my employer; it a mutual fund and has done quite well over the 10 years of employment. HOWEVER, the fund is most likely not shariah-compliant.

Top 10 holdings (~50% of fund):

NVIDIA CORP

APPLE INC

AMAZON.COM INC

MICROSOFT CORP

ALPHABET INC CL A

LULULEMON ATHLETICA INC

SALESFORCE.COM INC

ALPHABET INC CL C

SHOPIFY INC CL A

FACEBOOK INC CL A

I have since left that employer and now I am unsure what to do. Is there a way to purify the investments or should I just take my contributions (and employer match) and give away the almost 70% of gains that the account has earned?

Once I figure out how to handle the 401K, my goal is is to roll it into an IRA. I am unsure if it should be regular IRA or Roth. I would invest in Amana and maybe one of the ETFs (from Wahed or SPUS).

My current investments include AMAGX, AMANX, and Wahed Aggressive Portfolio. I am currently unemployed unfortunately and getting increasingly worried about my finances and whether they are the best for me at this time in my mid-30s.

My questions:

1. Is there a way to purify a shariah non-compliant 401K fund or is it better to give away all of the gains to be on the safe side?
2. In my situation of unemployment, should I rollover that permissible portion of that 401K fund into a regular IRA or roth IRA?
3. If I open the IRA, can I just do it through Saturna since I'm already dealing with them or should I stick with Fidelity since the 401K is through them. Are there extra fees by having Saturna be the broker versus Fidelity?

JazakAllahu Khayran.

 

[connor1027]

@mcp293

1. First question is asking for fatwa, so recommend Consluting a scholar.
2. Rollover your 401k to traditional IRA. If you roll it over to Roth then you will be paying big amount of tax now. But you can start new Roth IRA account and start contributing to it.
3. Yes, you can rollover your 401k from Fidelity to Traditional IRA account with Saturna. Or you can rollover to any other investment firm like Schwab and diversify your investment between Amana and Wahed. No fees for rollover.

 

[mcp293]

@connor1027 Thank you for your reply.

Ok, so I understand the 401k amount should go to a traditional Roth to avoid large tax deductions and I can open a Roth IRA separately if I wish.

I like the point about going with a diversified IRA and I wouldn't be able to do that if I open it with Saturna directly. Thank you for that insight. I'll look into going with Schwab.

I wish there was a scholar I could ask or who would reply. I posted on Islamic Finance Guru and didn't get a response.

I'm thinking to get rid of a large portion of the 401K as impermissable just to be safe. What I'm going to do with it to "get rid of it", I have no idea.

 

[connor1027]

@mcp293 Go to YouTube and search for Imam Main Alquda, listen to his lectures and fatwa on how to deal with 401K. He is part of AMJA scholars.
Try to connect with him on social media and ask him your question on purification of 401K.