H6: Change in Methodology for Netting IRA and Keogh Account Balances in M2

Starting with the H.6 release to be published on Tuesday, July 28, 2026, the Federal Reserve will discontinue the netting of individual retirement account (IRA) and Keogh account balances held at depository institutions (DIs) and at money market funds from the small-denomination time deposit and retail money market fund components of the M2 monetary aggregate, respectively. Instead, these balances will themselves become a separate component of the M2 monetary aggregate that will be netted directly from the aggregate. The change in netting methodology will be applicable back to the start of the time series for the small time deposit and retail money market fund components and going forward.BackgroundWhen calculating M2, the Federal Reserve excludes deposits that are not liquid, such as IRAs that include large penalties for preretirement withdrawals. IRA and Keogh account balances at DIs are netted from small time deposits, and IRA and Keogh account balances at money market funds are netted from retail money market funds. Both small time deposits and retail money market funds are components of M2.Reason for ChangeAnalysis of survey responses collected in recent years showed that the distribution of IRA and Keogh account balances at DIs has evolved over time, with a large amount of these balances now held in deposit types other than time deposits, such as other liquid deposits. Since detailed data on the distribution of IRA and Keogh account balances at DIs by deposit component are not available, the Federal Reserve has determined that aggregate-level netting from M2 is a more accurate methodology than netting from individual components of M2.For consistency, the Federal Reserve will also discontinue the netting of IRA and Keogh account balances held at money market funds from the retail money market fund component of M2.ImpactWith this change in netting methodology from the component level to the aggregate level, the small time deposit and retail money market fund components of M2 will be higher, as they will no longer be reduced by IRA and Keogh account balances at DIs and at money market funds, respectively. Total non-seasonally adjusted M2 will remain unchanged, while seasonally adjusted M2 will have minor revisions. These revisions will occur because IRA and Keogh account balances will be incorporated into M2 on a non-seasonally adjusted basis, whereas those balances were previously incorporated into M2 components that are seasonally adjusted. The IRA and Keogh account balances time series at DIs and at money market funds have been tested and do not require seasonal adjustment.Please refer to the Technical Q&As for more details.