401K with Prudential

💰 Everyday Islamic Finance Savings & Investing
#1

Salam,
My company is offering 401K with prudential and start to match. I research the options that are shariah compliant or socially responsible but it looks to me that there are none available in my portfolio.
I found one doc in my account that says about self-directed brokerage option

Self Directed Brokerage Product
• In addition to investments listed on the investment
comparison chart, your Plan offers you the option of making
your investment through a brokerage account option
established with Prudential Investment Management Services
LLC (PIMS). To establish a brokerage account contact
877-778-2100.
. After your account is established, subsequent transfers must
be at least $1,000.
. The balance in this account may not exceed 70% of your total
plan balance.
. Through the Self Directed Brokerage Account, you can invest
up to 70% of your account in a broad range of investments
within a brokerage window, as determined by your plan
sponsor and described in your enrollment materials.
. You must have a minimum balance of $1,000 in your plan to
utilize the Self Directed Brokerage Account.
. Your first transfer into this account must be at least $2,500.

I didn’t find FUND ticker but my portfolio is like this:

  • BlackRock Russell 2000 Index T
  • BlackRock U.S. Debt Index Fund W
  • BlackRock Mid Capitalization Equity Index Fund M
  • BlackRock Equity Index Fund M
  • BlackRock Total Return Bond Fund T
  • Principal Diversified Real Asset Collective Investment Trust Tier II
  • American Funds EuroPacific Growth Fund Class R-6
  • Fidelity International Index Fund
  • MassMutual Mid Cap Growth Fund Class I
  • T. Rowe Price Blue Chip Growth Trust (Class T4)
  • Vanguard Equity-Income Fund Admiral Shares
  • Victory Sycamore Established Value Fund Class R
  • Small Cap Growth / TimesSquare Fund
  • Small Cap Value / Kennedy Capital Fund
  • Prudential Stable Value Fund

In anyway I can work on this to make more halal or just stop my contribution. I am new to all this, so please guide me.

#2

Hey Assalaamu Alykum Fari! Welcome to the Community!

So if I’m reading this properly, you’ll be able to invest up to 70% of your total plan balance using the self directed brokerage.

The remaining the 30% what options are available? Is it always invested into the Portfolio you’ve laid out?

#3

Walekum Salam Farhan. Yes but in my case actually I didn’t met 1000 limit they mentioned so brokerage account is out of picture.
I wanted to know about the list that I provided, out of those which one I should remove to minimize haram investment? I don’t have any other options available.

#4

Salam,

The 70% limitation is unfortunate and strange. In any case you should check to see if the self directed brokerage allows you to invest in halal mutual funds and/or ETFs (e.g. Amana funds or HLAL/SPUS). If so, I would personally use that option once I had saved enough to use it, since it’s better than nothing.

The complicated thing is determining what to invest in meanwhile that’s least Haram and how to purify it later. I wish there was a simple answer but there isn’t and you’ll need to try your best there. Generally speaking you want to find stock funds that have the least percentage of financial companies as those tend to deal with interest. Rather than stop contributing because of this, I would contribute to get the full match and then do a very conservative purification of returns if possible so you can have some peace of mind. You can donate money you hold in non retirement savings equal to your calculation of impure gains once you get a chance to move your investments to a halal alternative.

So for all those options you listed, you should have some way to see what sector percentages they hold. Anything that mentions bonds, money market, debt, or financials in the name are most likely haram. I saw one thing you listed mentioned debt.

Best wishes and may Allah accept your efforts to keep things halal.

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