SPAXX vs FDRXX — Fidelity's Two Cash Sweep Money Market Funds

Why Fidelity's default sweep is already better than Schwab's

Fidelity's structural advantage: your cash auto-sweeps into one of two government money market funds by default, not into a low-yielding bank account. You pick which MMF at account opening (or change later); cash sits there earning ~4.10% until you trade.

The contrast: Schwab's default cash sweep is into the Schwab Bank Cash Sweep, paying ~0.45%. Schwab requires you to manually buy SNSXX or SWVXX to earn the MMF yield. Fidelity handles it automatically.

For an investor with $100K of average cash balance, the Fidelity-vs-Schwab default-sweep difference is roughly $3,650/year of yield captured without any action. This is the single biggest reason long-term investors with large cash positions tend to consolidate at Fidelity rather than Schwab.

SPAXX vs FDRXX — the comparison

Despite the slightly higher expense ratio (0.42% vs 0.34%), SPAXX matches FDRXX's yield because of slightly different portfolio composition. The two funds are very close substitutes — the meaningful difference is the state-tax-exempt percentage.

State-tax math — which one wins for you

Both funds publish their state-tax-exempt percentage annually (look for the "Tax Information" document at fidelity.com each February). For 2024 tax year, approximate state-exempt percentages:

• SPAXX: ~35% of dividend income exempt from state tax (varies year to year)
• FDRXX: ~55% of dividend income exempt from state tax

Worked example — $100,000 at 4.10% yield, CA 9.3% state bracket, 22% federal:

FDRXX wins by ~8 bps after state tax for a CA resident. The gap is modest but real — about $76 per $100K per year. For balances of $250K+, the FDRXX advantage is worth the 30-second switch.

For residents of no-state-tax states (TX, FL, WA, NV, SD, TN, WY, AK), the state-tax-exempt percentage has no value — SPAXX and FDRXX are interchangeable.

How to switch your default sweep at Fidelity

The mechanic is straightforward but tucked into a menu most users never visit.

Web interface

1. Log in to fidelity.com
2. Click the account name in the upper right
3. Choose "Account Features"
4. Find "Cash Management" or "Core Position"
5. Click "Change Core Position"
6. Choose FDRXX (or SPAXX, or FZFXX) from the dropdown
7. Confirm; the change takes effect at end of day

Mobile app

1. Account icon → Account Details
2. Scroll to "Core Position"
3. Tap "Change"
4. Select FDRXX

Existing balance auto-transfers from the old MMF to the new one at next settlement. No fees, no taxable event, no minimum holding period.

Important: Some Fidelity account types (e.g., certain retirement plans, business accounts, joint with rights of survivorship) may restrict core position options. If FDRXX isn't in your dropdown, you may be stuck with SPAXX as the only option — or contact a Fidelity representative to verify eligibility.

Why not just use FZFXX?

Fidelity offers a third government MMF, FZFXX (Fidelity Treasury Money Market Fund), which holds primarily Treasuries (highest state-tax-exempt percentage, around 90-95%). For high-state-tax residents, FZFXX should theoretically beat both SPAXX and FDRXX after tax.

The catch: FZFXX is not eligible as a default core position in most retail Fidelity accounts. It can only be held as a manual purchase — you'd have to buy it like any other MMF (similar to the Schwab SNSXX manual-purchase process). For users who prize the auto-sweep convenience, FZFXX defeats the purpose. For users willing to manually purchase, FZFXX gives the Treasury-MMF advantage at Fidelity.

Practical recommendation:

• Casual cash holders, any state: FDRXX as core position. Set it and forget it.
• High-state-tax residents with $250K+ cash, willing to manage: Keep small operational balance in FDRXX, move the bulk to FZFXX with a quarterly rebalance.
• Sophisticated users with $1M+ cash: Direct T-bill ladder via Fidelity bond desk — lower expense ratio, slightly higher yield, full state-tax exemption.

Risk profile of both funds

SPAXX and FDRXX are both Rule 2a-7 government money market funds. Under SEC rules:

• 99.5% of holdings must be in government securities or repos backed by government securities
• Weighted average maturity must be 60 days or less
• Maximum maturity of any individual holding: 397 days
• Cannot impose redemption gates or liquidity fees (government MMFs are exempt from the gate/fee rules that apply to prime MMFs)

The practical safety analysis: both funds invest in either direct US government obligations or in repurchase agreements collateralized by US Treasuries. The risk of loss is extremely low — comparable to direct T-bill ownership. The funds have maintained a $1.00 NAV every single day since inception.

The one credit-stress event in MMF history (Reserve Primary Fund "breaking the buck" in September 2008) was a prime fund holding Lehman commercial paper. Government MMFs were unaffected and have never broken the buck.

When to leave Fidelity MMFs for something else

Two cases:

1. Time horizon over 1 year

An MMF tracks the Fed funds rate — rate cuts hurt the MMF immediately. A brokered CD at 4.80% or a MYGA at 5.60% locks in current rates for 5-7 years. If you know the cash won't be touched, lock the rate.

2. Cash above the SIPC limit ($500K securities / $250K cash)

SIPC protects securities at brokerages up to $500K (including up to $250K of cash). MMF shares count toward the securities limit, not the cash limit, so MMF holdings are protected up to $500K. Above that, consider splitting across multiple brokerages or using direct T-bill ownership (no broker counter-party risk).

Related reading

• SNSXX vs SWVXX (Schwab) comparison
• VUSXX Vanguard Treasury MMF
• Buying Treasuries step-by-step
• I-Bond vs CD vs TIPS
• Brokered CD vs bank CD vs MYGA

Want my independent take on whether this fits your situation?

I'm Hans Goldstein — independent licensed insurance producer (NPN 20602398), appointed with multiple A-rated carriers. I run side-by-side comparisons against CDs, MYGAs, Treasuries, and MMFs every week for retirees and pre-retirees. Tell me what you're considering and I'll send back a written comparison.

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FAQ

Q: Is SPAXX or FDRXX FDIC-insured?
A: Neither. Money market funds are not FDIC-insured. They're SEC-registered investment products held in your brokerage account, which is SIPC-insured up to $500K of securities (including MMF shares).

Q: Can I switch my Fidelity core position any time?
A: Yes, anytime, no fees, no taxes. The change takes effect at end of the current trading day. No minimum holding period in either fund.

Q: Does FDRXX or SPAXX pay daily?
A: Both pay monthly dividends. Yield accrues daily and is paid as cash into your account on the last business day of each month.

Q: Why are SPAXX yields lower than direct T-bills?
A: Expense ratio (~0.34-0.42%) and the cost of overnight repo participation. Direct 4-week T-bills currently yield ~4.40-4.55% vs SPAXX at 4.10% — a ~30-45 bp gap. The MMF buys you operational simplicity (auto-sweep, no maturity management) at the cost of some yield.

Q: Can I hold SPAXX in a Roth IRA?
A: Yes. SPAXX is eligible in Roth IRAs, Traditional IRAs, taxable brokerage, business accounts — any account type at Fidelity. State-tax-exempt percentage has no value inside an IRA.

Q: What's the difference between SPAXX and SPRXX?
A: Different funds. SPAXX = Fidelity Government Money Market. SPRXX = Fidelity Money Market Fund (a prime fund, similar to Schwab's SWVXX). SPRXX yields ~10-15 bps higher than SPAXX but holds corporate debt, not just government securities.

Q: Does Fidelity charge a fee to use SPAXX or FDRXX?
A: No additional fee beyond the fund's expense ratio (0.34-0.42%). No transaction fees, no minimum, no account-level fees.

Q: Can I have FDRXX in some accounts and SPAXX in others?
A: Yes, each Fidelity account has its own core position setting. You can mix and match across accounts at your preference.

Disclosure

This article is general educational information, not personalized financial, tax, or legal advice. All rates, IRS limits, Social Security PIA factors, IRMAA brackets, FDIC/NCUA coverage, and state guaranty fund coverage figures are current as of the publication date and subject to change. IRMAA brackets and Roth/Traditional IRA limits cited reflect IRS guidance for 2026 and may be updated by the IRS or SSA; confirm current figures at irs.gov and ssa.gov before acting. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated annuity carriers; he does not sell bank CDs, money market funds, or Treasury securities and is not affiliated with any bank, brokerage, or government agency discussed. No compensation has been received from any third party in connection with this article. Bank CDs are FDIC-insured deposit products; credit union share certificates are NCUA-insured; money market funds are SEC-regulated investment products with no FDIC coverage; Treasuries are direct obligations of the U.S. government; MYGAs are insurance contracts backed by carrier balance sheets and state guaranty associations. These are different product categories with different protections, tax treatments, and trade-offs. Always confirm current rates and tax law with the issuer or a CPA before acting.