Skilled care -- whether at home, in an institutional setting or by a professional caregiver -- is one of the most significant financial demands clients face in retirement, says advisor Joseph Birkofer with Legacy Asset Management, in Houston. "The average person has a vague idea of long-term care expenses and a lot of hope that their assets will cover them," he says. "They never sit down and actually identify the specific financial demands of their retirement days."

While professional LTC is expensive, "free" care provided by family members can be financially burdensome as well. Many people who end up relying on unpaid care do so out of necessity, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. "A significant number of people wait too long and the cost gets too high," he says.

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