Nicholson Financial Services,Inc.David S. NicholsonFinancial Advisor89 Access RoadSte. CNorwood, MA 02062781-255-1101866-668-1101david@nicholsonfs.comwww.nicholsonfs.com

Summer 2013And so it begins...

Four Retirement Saving Myths

Financial Planning When You Have a ChronicIllness

I already have health insurance. Will I have tochange my plan because of the newhealth-care reform law?

Nicholson Financial ServicesDid You Know...?And so it begins...

See disclaimer on final page

2013 has been a strong year for stocks so far.Through July 31st, the S&P 500 was up 19.63%,the DJIA was up 21% and the Russell 2000Index was up 23.97%. International stockscontinued to trail the US in performance with theMSCI EAFE Index up 7.53%. Why has the USstock market been so strong? Although there area number of factors, I believe we are witnessinga "repricing of risk." After the 2008 crisis, manyinvestors were scared away from investing instocks. For the several years that followed, themarkets have not been offering stocks the kind ofvaluation premiums that existed prior to 2008.Put simply, even though corporate earnings andrevenue have continued to grow and prosper,stocks didn't go up as much as they should have,or would have prior to 2008. I have told clients forthe past few years that I felt stocks wereundervalued on the whole and that we could seea time come where the markets undergo asignificant valuation shift. If that happened,stocks would likely go up very quickly asinvestors got more comfortable with highervaluations. That event combined with a lack ofany significant negative news this year hasfueled quite an impressive run for equities.

Nicholson Financial Services, Inc. is anindependent firm.

In my last newsletter, I wrote the article"Bubbles" in reference to the current outlook forlong-term bonds. To sum up, it was my opinionthat long-term bonds have more interest raterisk built into them than ever before andownership of such bonds could have a verynegative impact on a portfolio over the next fewyears. We recently got a preview of what maybe yet to come.

On June 19th, Federal Reserve Chairman BenBernanke announced the central bank wouldstart to reduce its stimulus measures later thisyear if the economy is strong enough. Thiscaused a pullback in the markets as investorsfeared what a decrease in federal supportwould mean. The S&P 500 had its worst twoweek period of the year following that headline,dropping about 5.5%. More surprising to mewas the reaction of the bond market. Long-termbonds had their worst month in years. In June,over $80 Billion flowed out of bond mutualfunds. This is in stark contrast to the massivenet inflows to such funds over the past 4-5years. My opinion, as expressed in the"Bubbles" article, is that this is the beginning ofthe "smart money" repositioning from long-termbonds into other investment opportunities.

In addition to the Fed Chairman's comments,real interest rates have been going up forseveral months. The yield on the 30 yearTreasury bond has gone from a low this year of2.81% in early May to roughly 3.75% as I writethis. In my opinion, the bond market is startingto anticipate the Fed raising interest rates.However, that hasn't even happened yet. TheS&P 500 quickly recovered after the late-Juneswoon to hit new all time highs in July.However, long-term bonds have remainedweak and I believe that trend will only getworse.

I find it interesting that the stock and bondmarkets reacted so harshly to Mr. Bernanke'scomments in June. I read the commentscarefully and did not find anything negative inwhat he said. On the contrary, I thought hiscomments were very positive.

Basically, he was saying that IF the economy isstronger later this year, then the FederalReserve would likely begin to reduce its assetpurchases. The Fed will likely end all suchpurchases in mid to late 2014. The markets areconcerned about the end of easy moneyflowing into the system. However, if theeconomy is strong enough, it will not need thatmoney. For most of this country's existence, ourgovernment has not used such a fiscal policy.As taxpayers and investors, don't we want tosee those asset purchases stop? Don't we wantthe economy to be strong enough that suchmeasures by the Fed are unnecessary?

To me, this is another example of manyinvestors focusing on the wrong thing. More tothe point, they focus on what the media tellsthem they should. Again, I saw no real negativein Mr. Bernanke's comments, but the financialnews media made it sound like the beginning ofArmageddon. Although I don't think thesituation is that dire, I do believe the trend ofmoney flowing out of long-term bonds and intostocks, commodities and real estate willcontinue.

This time is really no different from any other.Investors should be focusing on what they ownand why they own it instead of worrying aboutthe headlines. I know from experience this isoften easier said than done. However, Iregularly reiterate to clients that a major goal ofmine as an advisor is helping them stayfocused using logic rather than being swayedinto making poor decisions by fear or greed.

The father of value investing, Benjamin Graham(whose teachings are closely followed by thelikes of Warren Buffett) once said: "Individualswho cannot master their emotions are ill-suitedto profit from the investment process." Grahamwrote those words over 50 years ago, but theyare still very true. Today investors can mastertheir emotions with support from a seasonedadvisor.

If the headlines are bothering you, I am only aphone call away.

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Four Retirement Saving MythsNo matter how many years you are fromretirement, it's essential to have some kind ofgame plan in place for financing it. With today'slonger life expectancies, retirement can last 25years or more, and counting on Social Securityor a company pension to cover all yourretirement income needs isn't a strategy youreally want to rely on. As you put a plantogether, watch out for these common myths.

Myth No. 1: I can postpone saving nowand make it up laterReality: This is very hard to do. If you waituntil--fill in the blank--you buy a new car, thekids are in college, you've paid off your ownstudent loans, your business is off the ground,or you've remodeled your kitchen, you mightnever have the money to save for retirement.Bottom line--at every stage of your life, therewill be competing financial needs. Don't makethe mistake of thinking it will be easier to savefor retirement in just a few years. It won't.

Consider this: A 25 year old who saves $400per month for retirement until age 65 in atax-deferred account earning 4% a year wouldhave $472,785 by age 65. By comparison, a 35year old would have $277,620 by age 65, a 45year old would have $146,710, and a 55 yearold would have $58,900.

Note: This is a hypothetical example and is notintended to reflect the actual performance ofany specific investment.

Why such a difference? Compounding.Compounding is the process by which earningsare reinvested back into a portfolio, and thoseearnings may themselves earn returns, thenthose returns may earn returns, and so on. Thekey is to allow enough time for compounding togo to work--thus the importance of starting tosave early.

Now, is it likely that a 25 year old will be able tosave for retirement month after month for 40straight years? Probably not. There are timeswhen saving for retirement will likely need totake a back seat--for example, if you'rebetween jobs, at home caring for children, oramassing funds for a down payment on ahome. However, by starting to save forretirement early, not only do you put yourself inthe best possible position to take advantage ofcompounding, but you get into the retirementmindset, which hopefully makes you more likelyto resume contributions as soon as you can.

Myth No. 2: A retirement target datefund puts me on investment autopilotReality: Not necessarily. Retirement target datemutual funds--funds that automatically adjust to

a more conservative asset mix as you approachretirement and the fund's target date--areappealing to retirement investors because thefund assumes the job of reallocating the assetmix over time. But these funds can vary quite abit. Even funds with the same target date canvary in their exposure to stocks.

If you decide to invest in a retirement targetdate fund, make sure you understand the fund's"glide path," which refers to how the assetallocation will change over time, including whenit turns the most conservative. You should alsocompare fees among similar target date funds.

Myth No. 3: I should invest primarily inbonds rather than stocks as I get olderReality: Not necessarily. A common guideline isto subtract your age from 100 to determine thepercentage of stocks you should have in yourportfolio, with the remainder in bonds and cashalternatives. But this strategy may need someupdating for two reasons. One, with moreretirements lasting 25 years or longer, yoursavings could be threatened by years ofinflation. Though inflation is relatively low rightnow, it's possible that it may get worse incoming years, and historically, stocks have hada better chance than bonds of beating inflationover the long term (though keep in mind thatpast performance is no guarantee of futureresults). And two, because interest rates arebound to rise eventually, bond prices could bethreatened since they tend to move in theopposite direction from interest rates.

Myth No. 4: I will need much lessincome in retirementReality: Maybe, but it might be a mistake tocount on it. In fact, in the early years ofretirement, you may find that you spend just asmuch money, or maybe more, than when youwere working, especially if you are still paying amortgage and possibly other loans like auto orcollege-related loans.

Even if you pay off your mortgage and otherloans, you'll still be on the hook for utilities,property maintenance and insurance, propertytaxes, federal (and maybe state) income taxes,and other insurance costs, along with food,transportation, and miscellaneous personalitems. Wild card expenses duringretirement--meaning they can vary dramaticallyfrom person to person--include travel/leisurecosts, health-care costs, financial help for adultchildren, and expenses related tograndchildren. Because spending habits inretirement can vary widely, it's a good idea asyou approach retirement to analyze whatexpenses you expect to have when you retire.

At every stage of your life,there will be competingfinancial needs. Don't makethe mistake of thinking itwill be easier to save forretirement in just a fewyears. It won't.

Before investing in a mutualfund, consider itsinvestment objectives, risks,charges, and expenses,which can be found in theprospectus available fromthe fund. Read it carefullybefore investing.

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Financial Planning When You Have a Chronic IllnessWhen you live with a chronic illness, you needto confront both the day-to-day and long-termfinancial implications of that illness. Talkingopenly about your health can be hard, butsharing your questions and challenges withthose who can help you is extremely important,because recommendations can be bettertailored to your needs. Every person with achronic illness has unique issues, but here's alook at some topics you might need help withas you're putting together your financial plan.

Money managementA budget is a useful tool for anyone, but it'sespecially valuable when you have a chronicillness, because it will serve as a foundationwhen planning for the future. Both your incomeand expenses may change if you're unable towork or if your medical costs rise, and you mayhave unique expenses related to your conditionthat you'll need to account for. Clearly seeingyour overall financial picture can also help youfeel more in control.

Keeping good records is also important. Forexample, you may want to set up a system tohelp you track medical expenses and insuranceclaims. You may also want to prepare a list ofinstructions for others that includes where tofind important household and financialinformation that a trusted friend or relative canaccess in an emergency.

Another step you might want to take issimplifying your finances. For example, if youhave numerous financial accounts, you mightwant to consolidate them to make it easier andquicker for you or a trusted advisor to manage.Setting up automatic bill payments or onlinebanking can also help you keep your budget ontrack and ensure that you pay all bills on time.

InsuranceReviewing your insurance coverage isessential. Read your health insurance policy,and make sure you understand yourco-payments, deductibles, and the nuts andbolts of your coverage. In addition, find out ifyou have any disability coverage, and whatterms and conditions apply.

You may assume that you can't purchaseadditional life insurance, but this isn'tnecessarily the case. It may depend on yourcondition, or the type of life insurance you'reseeking--some policies will not require amedical exam or will offer guaranteedcoverage. If you already have life insurance,find out if your policy includes accelerated(living) benefits. You'll also want to review yourbeneficiary designations. If you're married,you'll want to make sure that your spouse has

adequate insurance coverage, too.

InvestingHaving a chronic illness can affect yourinvestment strategy. Your income, cash flowrequirements, and tolerance for risk maychange, and your investment plan may need tobe adjusted to account for both your short-termand long-term needs. You may need to keepmore funds in a liquid account now (forexample, to help you meet day-to-day livingexpenses or to use for home modifications, ifnecessary) but you'll want to thoroughlyevaluate your long-term needs before makinginvestment decisions. The course of yourillness may be unpredictable, so yourinvestment plan should remain flexible and bereviewed periodically.

Estate planningYou might think of estate planning assomething you do to get your affairs in order inthe event of your death, but estate planningtools can also help you manage your financesright now.

For example, you may want to have a durablepower of attorney to help protect your propertyin the event you become unable to handlefinancial matters. A durable power of attorneyallows you to authorize someone else to act onyour behalf, so he or she can do things like payeveryday expenses, collect benefits, watch overyour investments, and file taxes.

A living trust (also known as a revocable orinter vivos trust) is a separate legal entity youcreate to own property, such as your home orinvestments. The trust is called a living trustbecause it's meant to function while you'realive. You control the property in the trust, and,whenever you wish, you can change the trustterms, transfer property in and out of the trust,or end the trust altogether. You name aco-trustee such as a financial institution or aloved one who can manage the assets if you'reunable to do so.

You may also want to have advanced medicaldirectives in place to let others know whatmedical treatment you would want, or that allowsomeone to make medical decisions for you, inthe event you can't express your wishesyourself. Depending on what's allowed by yourstate, these may include a living will, a durablepower of attorney for health care, and a Do NotResuscitate order.

Review your plan regularlyAs your health changes, your needs will changetoo. Make sure to regularly review and updateyour financial plan.

There's no such thing as aone-size-fits-all financialplan for someone with achronic illness. Everycondition is different, soyour plan must be tailoredto your needs andchallenges, and reviewedperiodically.

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Nicholson FinancialServices, Inc.David S. NicholsonFinancial Advisor89 Access RoadSte. CNorwood, MA 02062781-255-1101866-668-1101david@nicholsonfs.comwww.nicholsonfs.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

This information, developed by anindependent third party, has been obtainedfrom sources considered to be reliable, butRaymond James Financial Services, Inc.does not guarantee that the foregoingmaterial is accurate or complete. Thisinformation is not a complete summary orstatement of all available data necessary formaking an investment decision and does notconstitute a recommendation. Theinformation contained in this report does notpurport to be a complete description of thesecurities, markets, or developments referredto in this material. This information is notintended as a solicitation or an offer to buy orsell any security referred to herein.Investments mentioned may not be suitablefor all investors. The material is general innature. Past performance may not beindicative of future results. Raymond JamesFinancial Services, Inc. does not provideadvice on tax, legal or mortgage issues.These matters should be discussed with theappropriate professional.

Securities offered through Raymond JamesFinancial Services, Inc., memberFINRA/SIPC, an independent broker/dealer,and are not insured by FDIC, NCUA or anyother government agency, are not deposits orobligations of the financial institution, are notguaranteed by the financial institution, andare subject to risks, including the possibleloss of principal.

What are health Exchanges and do I have to buy healthinsurance through them?A health insurance Exchangeis essentially a one-stop healthinsurance marketplace.Exchanges are not issuers of

health insurance. Rather, they contract withinsurance companies who then make theirinsurance coverage available for examinationand purchase through the Exchange. Inessence, Exchanges are designed to bringbuyers and sellers of health insurance together,with the goal of increasing access to affordablecoverage.

The Patient Protection and Affordable Care Actdoes not require that anyone buy coveragethrough an Exchange. However, beginning in2014, each state will have one Exchange forindividuals and one for small businesses (orthey may combine them). States have theoption of running their own state-basedExchange or partnering with the federalgovernment to operate a federally facilitatedExchange. States not making a choice defaultto a federally run Exchange.

Through an Exchange, you can compareprivate health plans based on coverageoptions, deductibles, and cost; get direct

answers to questions about coverage optionsand eligibility for tax credits, cost-sharingreductions, or subsidies; and obtain informationon a provider's claims payment policies andpractices, denied claims history, and paymentpolicy for out-of-network benefits.

Policies sold through an Exchange must meetcertain requirements. Exchange policies can'timpose lifetime limits on the dollar value ofcoverage, nor may plans place annual limits onthe dollar value of coverage. Insurance mustalso be "guaranteed renewable" and can onlybe cancelled in cases of fraud. And Exchangescan only offer qualified health plans that coveressential benefits.

In order to be eligible to participate in anindividual Exchange:

• You must be a U.S. citizen, national, ornoncitizen lawfully present in the UnitedStates

• You cannot be incarcerated• You must meet applicable state residency

standards

I already have health insurance. Will I have to changemy plan because of the new health-care reform law?For the most part, no. ThePatient Protection andAffordable Care Act (ACA)does not require you to

change insurance plans, as long as your plan,whether issued privately or through youremployer, meets certain minimumrequirements. In fact, the ACA may addbenefits to your existing plan that you have nothad before.

Your present insurance plan may beconsidered a grandfathered plan under theACA if your plan has been continually inexistence since March 23, 2010 (the date ofenactment of the ACA), and has notsignificantly cut or reduced benefits, raisedco-insurance charges, significantly raisedco-payments or deductibles, and your employercontribution toward the cost of the plan hasn'tsignificantly decreased. However, if agrandfathered plan significantly reduces yourbenefits, decreases the annual dollar limit ofcoverage, or increases your out-of-pocketspending above what it was on March 23, 2010,then the plan will lose its grandfathered status.

Some provisions of the ACA apply to all plans,

including grandfathered plans. Theseprovisions include:

• No lifetime limits on the dollar cost ofcoverage provided by the plan

• Coverage can't be rescinded or cancelled dueto illness or medical condition

• Coverage must be extended to adultdependents up to age 26

The ACA doesn't apply to all types ofinsurance. For example, the law doesn't applyto property and casualty insurance such asautomobile insurance, homeowners insurance,and umbrella liability coverage. The ACA alsodoesn't affect life, accident, disability, andworkers' compensation insurance. Nor does thelaw apply to long-term care insurance, nursinghome insurance, and home health-care plans,as long as they're sold as stand-alone plansand are not part of a health plan. Medicaresupplement insurance (Medigap) is generallynot covered by the ACA if it's sold as aseparate plan and not as part of a healthinsurance policy.

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