Fidelity Treasury Only Money Market Fund (FDLXX) Review (2026)
Quick take: FDLXX is Fidelity's Treasury-only MMF. Yield runs ~10 bps below SPAXX before the state-tax adjustment, and ~20-40 bps above SPAXX on an after-tax basis for high-state-tax residents (CA, NY, NJ, MA, OR). For Fidelity clients in California, FDLXX is the highest after-tax MMF choice the firm offers below the $100K FZDXX threshold.
| Fund family | Fidelity |
| Holdings type | U.S. Treasury bills and notes only (no repo, no agency) |
| Weighted avg. maturity | ~45 days |
| State tax on dividends | Substantially state-tax-exempt (typically 95-100% of dividends qualify as direct U.S. Treasury interest) |
Money market fund vs MYGA, after tax
What $100,000 earns in 5 years: money market fund vs MYGA, after tax
Rates used: Money market fund 3.76%, the highest 7-day yield we tracked (VUSXX, fund sites, September 23, 2026); yields change daily; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Money market fund, interest taxed every year | $115,550 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the money market fund, after tax | $10,586 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. A MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
How Fidelity Treasury Only Money Market Fund actually works
If you live in a high-state-tax state and your cash lives at Fidelity, FDLXX is almost always the right answer for any cash balance you don't need next week. The state-tax exemption alone is worth 30-50 bps for a Californian in the 9.3% bracket. That's more than the difference between most banks' top HYSA APYs in any given quarter.
Every U.S. money market fund operates under SEC Rule 2a-7, which dictates portfolio quality, weighted average maturity (60 days max for the WAM, 120 days for the weighted average life), and daily/weekly liquid asset minimums. The differences between funds are at the margin: which short paper they hold, what expense ratio they charge, and what tax treatment the dividends qualify for.
For the side-by-side with Fidelity's default core fund, see FDLXX vs SPAXX.
Holdings overview
Holdings type: U.S. Treasury bills and notes only (no repo, no agency).
Weighted average maturity (WAM): ~45 days. WAM determines how fast the fund's yield repositions when the Fed moves. A 30-day WAM means the entire portfolio has repriced within roughly one month of a Fed rate move. That's why MMF yields chase the Fed funds rate so tightly.
State-tax treatment: Substantially state-tax-exempt (typically 95-100% of dividends qualify as direct U.S. Treasury interest).
What we like
- Substantial state-tax exemption: the cleanest Fidelity vehicle for CA/NY/NJ residents.
- $0 minimum, so it works at any account size.
- Direct Treasury holdings only (no repo), which gives the cleanest exemption disclosure.
- Inside Fidelity ecosystem with same-day liquidity.
Rates expire like milk.
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What we don't
- 42 bps expense ratio: same as SPAXX, higher than Vanguard equivalents.
- Slightly longer WAM than VUSXX (45 vs. 30 days), so marginally more rate-sensitive.
- Not a default brokerage sweep; it must be purchased manually.
- Not FDIC-insured.
Tax notes
Money market fund dividends are reported on Form 1099-DIV as ordinary income and taxed at your marginal federal rate (10%-37%). For high earners in 32%+ brackets plus state tax, the after-tax yield on a 4.20% MMF can drop to 2.50-2.70%.
If the fund holds U.S. Treasury obligations, the portion of dividends attributable to those holdings is exempt from state and local income tax in most states (CA, NY, NJ, MA, OR enforce this strictly; CT, IL have minimum percentage thresholds). The fund publishes a year-end disclosure showing what percentage of dividends qualify. For a Californian in the 9.3% state bracket, the state-tax exemption on a Treasury-only MMF is worth ~40 bps of effective after-tax yield.
By contrast, multi-year guaranteed annuity (MYGA) growth defers tax until withdrawal. For a high earner who doesn't need the income, that deferral compounds into a meaningful effective-yield bump.
FDLXX and California state tax: a $100,000 worked example
For tax year 2025, Fidelity reported that 98.67% of FDLXX's ordinary dividends came from U.S. government securities, and FDLXX met the minimum U.S. government holdings that California, Connecticut and New York require before any part of a fund's dividends is exempt there (Fidelity, 2025 Percentage of Income from U.S. Government Securities). Fidelity's other government and Treasury money funds did not meet that minimum in 2025, so for residents of those three states their dividends were fully state-taxable, even though half or more of their income came from U.S. government securities.
| Fidelity fund | Ticker | 2025 share of dividends from U.S. government securities | Exempt in CA, CT, NY? |
|---|---|---|---|
| Treasury Only Money Market Fund | FDLXX | 98.67% | Yes, 98.67% of dividends |
| Treasury Money Market Fund | FZFXX | 61.52% | No, fully state-taxable |
| Government Cash Reserves | FDRXX | 52.17% | No, fully state-taxable |
| Government Money Market Fund | SPAXX | 50.90% | No, fully state-taxable |
Source: Fidelity, 2025 Percentage of Income from U.S. Government Securities. Outside CA, CT and NY, most states exempt the listed percentage for all four funds. Fidelity publishes the 2026 percentages after year-end.
Example: a California resident in the California 9.3% bracket (2025 single filer taxable income $72,724 to $371,479, per the FTB 2025 tax rate schedules) holds $100,000 for one year at FDLXX's 3.45% 7-day yield (September 24, 2026, per Fidelity, held constant for illustration), compared with a fund paying the same yield whose dividends are fully California-taxable (SPAXX, for a Californian):
| $100,000, one year, 3.45% | FDLXX | Fully CA-taxable fund, same yield |
|---|---|---|
| Dividends | $3,450.00 | $3,450.00 |
| Exempt from CA tax (2025 percentage) | $3,404.11 | $0.00 |
| CA-taxable dividends | $45.89 | $3,450.00 |
| CA tax at 9.3% | $4.27 | $320.85 |
| After California tax | $3,445.73 | $3,129.15 |
FDLXX keeps $316.58 more per $100,000 a year. Put another way, a fully California-taxable fund would need about a 3.80% yield to match FDLXX's 3.45% for this investor. Federal tax is the same for both (ordinary dividends either way), and the example ignores any federal deduction for state tax paid. In New York and Connecticut the same qualifying rule applies; plug in your own state rate. In a state with no income tax, the exemption is worth nothing and the higher headline yield wins.
When a MYGA beats this MMF: $250,000 math
Fidelity Treasury Only Money Market Fund paid 3.45% on September 24, 2026 (7-day yield, per Fidelity). That yield resets within days of any Fed move, up or down. A multi-year guaranteed annuity (MYGA) locks a rate for the entire term. Comparing both on $250,000:
| Scenario | 5-Year Term |
|---|---|
| Fidelity Treasury Only Money Market Fund @ 3.45% (yield above, held constant: optimistic) | $293,560 |
| A-rated 5-year MYGA @ 5.50% (low end of the range on October 14, 2026, public carrier rate sheets) | $326,740 |
| MYGA advantage | +$30,535 |
And the MYGA math above understates the gap, because:
- The MMF yield is held constant. In reality MMF yields move with the Fed funds rate, and the Fed moves both ways: it raised its target range to 3.75% to 4.00% on September 16, 2026.
- MMF dividends are taxed every year as ordinary income. MYGA growth defers tax until withdrawal. For a 32% federal + 9.3% CA earner, annual tax drag is ~30-40% of the yield.
- The MYGA rate is contractually guaranteed; the MMF yield is not guaranteed at all.
For money you don't need within 3 years, the math almost always favors a MYGA. Not because MMFs are bad, but because MMFs were never designed for multi-year money.
Who this fund is best for
Short-term cash you may need within the next 6-12 months. Brokerage cash that would otherwise sit in a low-yield sweep. Emergency reserves. Any cash position where liquidity and current yield matter more than rate certainty.
Who should consider an alternative
If you have $50K+ that you reliably won't touch for 3+ years, the MMF is the wrong vehicle. The better vehicle for 3 to 5 year money is a MYGA from an A-rated carrier; A-rated 5-year MYGAs paid about 5.50% to 6.05% on October 14, 2026 (public carrier rate sheets). The math is in the table above, and it's not close. See current MYGA rates →
FAQ: Fidelity Treasury Only Money Market Fund
Q: Is my money market fund FDIC-insured?
A: No. Money market funds are SEC-regulated mutual funds, not bank deposits. They are not FDIC- or NCUA-insured. Government and Treasury MMFs invest in extremely safe collateral (T-bills, repo backed by Treasuries, agency paper) but are not guaranteed to maintain the $1.00 NAV.
Q: What is the 7-day SEC yield?
A: The 7-day SEC yield is the annualized net yield earned by the fund over the prior 7 days, after expenses. It is the industry-standard yield disclosure and is updated daily. It is roughly forward-looking for the next week, not a guarantee of forward yield.
Q: How quickly does the yield reset when the Fed changes rates?
A: Very fast. Government MMFs hold paper with a weighted average maturity (WAM) of roughly 7-45 days, so within a month of a Fed move the entire portfolio has repriced. A 25 bp cut typically shows up in the 7-day yield within 2-4 weeks.
Q: Can I lose money in a money market fund?
A: Realistically, almost never on government and Treasury funds. Twice in history a U.S. money market fund has 'broken the buck' (NAV below $1.00): the Community Bankers U.S. Government Fund in 1994 and the Reserve Primary Fund in 2008. Both were edge cases. Government and Treasury MMFs are the safest tier.
Q: Are Treasury MMF dividends state-tax-exempt?
A: Generally yes. The portion of dividends attributable to direct U.S. Treasury obligations is exempt from state and local income tax in most states. Funds publish a year-end 'U.S. government interest' percentage. For high-state-tax residents (CA, NY, NJ, OR), this can boost effective yield by 30-50 bps.
Q: How is a MMF different from a high-yield savings account?
A: HYSAs are FDIC-insured bank deposits; MMFs are SEC-regulated mutual funds. HYSA APYs are set by the bank and tend to lag the Fed. MMF 7-day yields move with the Fed within weeks. Top MMFs typically out-yield top HYSAs by 30-80 bps in a stable rate environment.
Q: Why would I ever choose a MYGA over a money market fund?
A: For money you won't need for 3+ years. A MYGA locks its rate for the full term (A-rated 5-year MYGAs paid about 5.50% to 6.05% on October 14, 2026, per public carrier rate sheets). The MMF yield can fall 200+ bps in a single year if the Fed cuts. MYGAs also defer tax until withdrawal, which is meaningful for high earners.
Q: What happens to a MMF in a Fed cutting cycle?
A: Yield drops in lockstep, fast. In 2020 the Fed cut from 1.75% to 0.25% over 4 months; government MMF 7-day yields fell from ~1.65% to ~0.02% by mid-year. Anyone who locked a 3-5 year CD or MYGA at the 2020 highs out-earned MMF holders by hundreds of bps annually.
Q: Is FDLXX exempt from California state income tax?
A: Mostly. For tax year 2025, Fidelity reported that 98.67% of FDLXX's ordinary dividends came from U.S. government securities, and the fund met California's minimum-holdings requirement (Fidelity, 2025 Percentage of Income from U.S. Government Securities). So 98.67% of the FDLXX ordinary dividends on your 2025 Fidelity 1099 can be excluded on your California return; the remaining 1.33% is California-taxable. Federal tax still applies to all of it.
Q: Does the California exemption apply to every Fidelity Treasury or government money market fund?
A: No. In Fidelity's 2025 letter, SPAXX (50.90%), FDRXX (52.17%) and FZFXX (61.52%) did not meet the minimum U.S. government holdings that California, Connecticut and New York require, so their dividends were fully taxable in those three states. FDLXX did meet it. Residents of most other income-tax states can still exclude the listed percentage for all four funds.
Q: How do I calculate the state-exempt part of my FDLXX dividends?
A: Multiply the FDLXX ordinary dividends shown on your Fidelity 1099 by the percentage for that tax year (98.67% for 2025). Example: $3,450 of FDLXX dividends x 98.67% = $3,404.11 that may be state-exempt. Fidelity posts the new percentage each January for the prior year.
Q: What is FDLXX's 7-day yield in 2026?
A: 3.45% on September 24, 2026, per Fidelity (the dated figure in the snapshot at the top of this page). It is net of the fund's 0.42% expense ratio and changes daily. At that pace, $100,000 earns about $3,450 a year, or about $3,446 after California tax for a resident in the 9.3% bracket, because 98.67% of FDLXX's 2025 dividends were California-exempt.
More Money Market Fund research
- Best Money Market Funds 2026 (ranked)
- MMF vs MYGA, when each wins
- MMF vs HYSA: yield spread and risk
- MMF vs CD: liquidity vs lock
- Breaking the buck: 1994 & 2008 cases
- How MMF yields track the Fed funds rate
- High-Yield Savings reviews
- Best MYGA rates 2026
My take
Fidelity Treasury Only Money Market Fund (FDLXX) is a competent, reasonably priced money market fund. For short-term cash inside a Fidelity brokerage account, it does its job. For money you won't need for 3+ years, you can do meaningfully better with a locked rate on a top-rated MYGA: same A-rated insurance carriers, 100+ bps higher rate, tax deferred. Worth a 15-minute independent second opinion before letting six-figure cash sit in this fund for years.
About Hans Goldstein: Independent retirement income specialist. CA Life License #4273294. NPN #20602398. Reviews 30+ carriers and the full menu of cash alternatives. Phone: 213-414-2808. Email: hans@hansgoldstein.com.
Hans is independently licensed as an insurance producer; he does not sell money market funds or other securities. These reviews are based on publicly available fund prospectuses, fact sheets, SEC filings, and SEC-yield reporting requirements.
A multi-year guaranteed annuity (MYGA) is the insurance version of a CD: one fixed rate for a set term. As of October 14, 2026, A-rated-or-better insurers were paying about 5.50% to 6.05% on 5-year MYGAs. The best nationally available 5-year CDs paid about 4.70% to 5.00% APY, and big-institution 5-year CDs less (as of September 24, 2026: Capital One 360 60-month 3.60%, Navy Federal 5-year 3.85 to 3.90%). A MYGA also defers the tax, where a CD or money market fund is taxed every year on interest you have not spent.
The trade is liquidity: breaking a MYGA early costs a surrender charge, not a few months of interest, and it is backed by the insurer and your state guaranty association rather than the FDIC. See the side-by-side · Current MYGA rates
Sources: public carrier rate sheets (MYGAs, as of October 14, 2026; rates vary by state, premium and carrier); Bankrate 5-year CD table (as of October 14, 2026); capitalone.com; navyfederal.org (as of September 24, 2026). Rates change often; confirm before you buy.
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Talk to Hans Goldstein, a licensed independent insurance producer.
Money market funds are great for short-term cash. For money you don't need for 3+ years, a multi-year guaranteed annuity (MYGA) typically pays 100-150 bps more and defers tax. Get an independent side-by-side before you let cash drift in a MMF for 5 years.
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Disclosure
This review reflects publicly available fund prospectuses, fact sheets, and approximate 7-day SEC yields as of the date stated above. Money market fund yields change daily and reset roughly in line with the federal funds rate; always confirm current yield, expense ratio, holdings, and weighted average maturity against the most recent fund disclosure document before committing capital. Money market funds are not FDIC-insured. Government and Treasury money market funds historically maintain a stable $1.00 NAV but are not guaranteed to do so. See the "breaking the buck" history. Prime money market funds may impose liquidity fees or redemption gates during market stress. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) and does not sell securities or money market funds; comparisons to multi-year guaranteed annuities (MYGAs) are provided for informational context only. No compensation has been received from any fund company in connection with the publication of this review. Always read the actual fund prospectus and consult a licensed advisor before investing. Past yield does not predict future yield. State income tax treatment of U.S. Treasury obligations varies and is subject to change. Tax discussion reflects federal and California law as of 2026 and is subject to change.