Why? According to Islamic law (aka Shari’ah), it is forbidden to make money from interest known as “riba” in Arabic. … This means that adherent Muslims won’t partake in most 401(k) programs unless there is an option for the employee to direct the allocation of funds into which their money is invested.
Are IRAS Haram?
Therefore, with a self-directed IRA or Solo 401(k) plan, a Muslim can have greater control over his retirement accounts so they can be assured that the investment complies with Sharia law, which may not be possible in all mutual funds or ETFs. … For example, under Islamic law, collecting or paying interest is prohibited.