Compound Growth: A Islamic Retirement Fund’s Best Friend

Published on
June 6, 2024

How much is needed to retire comfortably in 2024? 

According to a recent article published by CNBC, most Americans believe that they will need at least $1.3 million to do so¹.

With the Bureau of Labor and Statistics projecting a rate of inflation of 3.1% for 2024², this will inevitably drive up the cost of living, making it more difficult to save that little bit at the end of the month to put towards your retirement fund. To make things worse, inflation will chip away at your investments each year they sit still or don't have a rate of return that matches that year's inflation rate. Amongst the masses, it is common practice to use interest-based financial tools such as savings accounts, bonds, and guaranteed investment certificates (GICs) to offset the effects of inflation; however, as Muslims, our options are limited given that all of the financial instruments just mentioned leverage Riba to turn over a profit.  

So what do we do? 

One option is to use shariah-compliant retirement options like the halal* IRAs offered by Wahed that leverage the power of compound growth over time to make something that sounds like a pipe dream more attainable. With consistency, time, and the effects of compound growth, you can begin turning your retirement dream into a reality today. Let's dive into understanding compound growth, its impact on the quality of life you'll enjoy in your golden years and some key pointers you’ll want to keep in mind to get the most out of it.

Introducing Your Halal Retirement Fund’s Greatest Ally

To kick things off, let's first define compound growth. Investopedia defines it as "The ability for a sum of money to grow exponentially over time by the repeated addition of earnings to the principal invested³." Put simply, compound growth is when your money grows faster and faster because you keep adding the earnings back into the original amount you invested. Picture a snowball rolling downhill; at first, the mass is small with hardly any momentum; however, over time, that mass continues to grow and pick up speed so that what you currently have is many times the size of what you started with. 

The snowball effect of compound growth on an islamic retirement fund

The same rules apply to your halal retirement fund; the more you add to it and let it grow over time, the larger your eventual earnings will be. Let's illustrate this idea with a real-life example. Ronald Reed was a janitor and gas station attendant in Vermont. Despite his modest salary, Ronald Reed saved and invested his money quietly, amassing a fortune that was over 8 million dollars at the time of his passing⁴. His success was a testament to the powers of patience, dedication and the power of compound growth.

Your Golden Years: Brought to you by Compound Growth

You may be thinking that we are living in a completely different time than the one Ronald Reed lived in while he amassed his fortune. But ask yourself, "Is it really?" When we finally decide to retire, do we not need food to eat, a place to live, and access to the proper treatment to ensure a high quality of life during our remaining years? The reality is that the cost of living isn't getting any cheaper. According to the Bureau of Labour Statistics, food prices rose by 2.6%, the cost of shelter rose by 6%, and healthcare services and commodities were up 0.3% and 3.0%, respectively². These costs become a lot more pronounced when you're on a fixed income that isn't being adjusted to account for these increases. This is where compound growth truly shines as the greatest asset in your retirement fund's arsenal. Letting compound growth do its job over the decades leading up to your retirement could mean the difference between your ability to effectively manage the increases in basic living expenses on a fixed income, leading to a higher quality of life, or scrounging together enough change to get by in another month.

Simple Steps to Make Compound Growth Work for You

Enough with the doom and gloom, am I right? What can you start doing today to harness the benefits of compound growth? Here's the good news: it isn't rocket science. In fact, you'll be well underway if you keep the following advice top of mind in your retirement savings plan: 

  1. Consistency is Key. Consistency is crucial in realizing the benefits of compound growth because it builds the habit of investing your money so that your principal is consistently growing. The greater the number of investments that you've made over time, the larger the principal amount will grow.
  2. The more you save, the more you earn: The amount of money you save at any given time is also a key ingredient in determining the impact compound growth has on your retirement fund. It’s useful to think of saving in percentages as opposed to fixed amounts. This approach allows your savings to grow proportionally as your income increases, unlike a fixed savings rate that remains constant regardless of income changes.
  3. Choosing the right partner: You want a partner that makes the process of investing for your retirement easy and painless. In his book "Atomic Habits," James Clear emphasizes the importance of making habits easy to adopt. He introduces the Four Laws of Behavior Change, one of which is 'Make It Easy.' According to Clear, the process of building a habit can be divided into four simple steps: cue, craving, response, and reward. The easier or more convenient you make the 'response' stage, the more likely the behavior will become a habit⁵. Make no mistake about it: investing is a habit and one that can have a significant impact on your future. 

We've also summarized the key points in an infographic for those of us who are more visual: 

Compound Growth Simplified - An Islamic Retirement Fund's Best Friend

If you were to invest in a halal IRA with one of Wahed's portfolios, we would be able to help you with all three steps. 

First off, our automatic transfers feature allows you to consistently make contributions to your retirement fund without you having to lift a finger once it's been set up. 

Secondly, we are constantly checking in with our users to see whether their financial situation has changed, meaning if you recently landed that big promotion at work, that additional income can be passed over to your retirement fund and vice versa in the case that you hit a financial bump in the road we want to make sure you aren't saving more than is within your budget.

To wrap things up, it's worth reiterating that a proactive approach to planning for your retirement is needed if the current financial landscape is any indication of future things to come. Given that our community is limited to shar'iah-compliant options as a means of investing in our future retirement, it is essential that we have the right partner and investment strategy to set us up for success. 

One of the most effective investment strategies in the arsenal of your retirement planning toolkit is that of compound growth, and by making consistent contributions relative to your income level in a halal IRA with one of Wahed's portfolios, you can take full advantage of the benefits of this tool. By following these principles, you can aim for a retirement that's financially secure and free from riba, ensuring peace of mind and a high quality of life in your golden years.

Learn more about Wahed’s retirement investment options today:


*The term 'Halal' denotes that it is permitted and follows Islamic law


  1. CNBC - Survey on American Retirement Savings:
  2. Bureau of Labor Statistics (BLS) - Inflation Rate Projection for 2024:
  3. Compound: What it Means, Calculation, Example:
  4. The Janitor Who Became A Multi-Millionaire by Retirement:
  5. How to start new habits that actually stick:

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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.

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