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Action Line: Convert your child’s IRA

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in Small Business Tax

Roth IRA conversions aren’t just for older taxpayers in 2010. Suppose your 20-year-old has $25,000 in a traditional IRA. If he or she converts to a Roth this year, the tax may be limited to $3,750 (15% of $25,000), spread out over the next two years.

Assuming a 7% annual return, the account will be worth $374,361 in 40 years, even without any extra contributions. At that point, your son or daughter can pull out all the money tax-free.

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