When You Do Everything Right But Your Retirement Plans Go Wrong

For some middle class families, saving for retirement can seem like a herculean task. Even those who are able to put money aside may find they have to dip into it unexpectedly to pay for emergency medical bills, cover a period of extended unemployment or use it for some similar sudden expense. A 2015 survey by FINRA Investor Education Foundation found that many retirement account owners had taken a loan (13 percent) or hardship withdrawal (10 percent) in the past year. And once you accumulate a nest egg, there's still the possibility that you could see a significant chunk of your retirement savings wiped out should a recession hit just as you are about to leave the workforce.

These setbacks can seem catastrophic, but financial experts argue they don't have to mean the end of your happy retirement dreams. Here's how to set things right when your retirement plan gets waylaid.

[See: 10 Ways to Repair Your Retirement Finances.]

Don't make any emotional decisions. The biggest mistake people made in the wake of the 2008 stock market crash was panic. "Many people pulled out completely, and they did not benefit from the recovery," says Rich Thompson Jr., owner of Advanced Legacy Concepts in Atlanta. Rather than make a rash decision in the face of a financial emergency, Thompson urges people to let calmer heads prevail. In some instances, the right course of action is the one that feels counter-intuitive. For instance, when the market declines, many people are in a rush to get their money out to avoid further losses when, historically, the market has always recovered. "The number one thing is to not panic," Thompson says. "Emotional decisions amplify losses."

Remember: You may have more time than you think. It's easier to avoid panicking if you remember time is in on your side, even if you're already retired. "Your retirement will likely be longer than [that of] previous generations," says Mike Lynch, vice president of strategic markets at Hartford Funds. That means a retiree could have 10, 20 or even 30 years from which to recover from a market downturn or personal emergency.

The same goes for a younger worker who, for whatever reason, has wiped out his retirement fund. While he certainly won't be in as good a financial position as if he had left his account intact, starting over at age 40 or 50 can still result in a modest nest egg to support retirement goals.

[See: How to Save for Retirement on Less Than $40,000 Per Year.]

Determine what went wrong. Ryan Serrecchia, executive vice president with EP Wealth Advisors, says people often find themselves turning to a retirement fund for cash when they don't have an emergency fund or a financial plan in place. Without those, money from a retirement account tends to become the fallback option when things go wrong.

There may be other factors as well. High medical bills could be a sign of inadequate health insurance. An extended bout of unemployment may signal a need to sharpen skills or transfer into a new field. As workers rebuild their retirement savings, they need to pinpoint and correct potential problem areas to avoid a repeat situation.

Adjust your retirement plans as needed. If your retirement fund has taken a hit, you may need to rethink your plans for the future. "It's stepping back and seeing what's achievable," Serrecchia says. In some cases, that may require scaling back travel goals or letting go of hopes for a second home. However, it could also mean a change in retirement income strategy. "Maybe we take Social Security early, and then we let that 401(k) grow," Lynch says. By correctly timing when to tap into each source of retirement income, people can minimize the damage of a down market or other investment loss.

[Read: 7 Tips to Live Well on Social Security Alone.]

Set in place safeguards for the future. The final step to rebounding from a retirement plan disaster is to create a system that will prevent future losses. "My advice is to always put things into place to protect yourself from these tragedies," Thompson says. That includes buying appropriate insurance, diversifying portfolios and building up adequate cash reserves. Some financial products, such as annuities, come with income guarantees,which can offer additional peace of mind.

Not surprisingly, financial planners say meeting with a professional can be one of the best ways to identify the appropriate safeguards and get your retirement savings back on track. "People think they can go it alone," Lynch says. "But I find it helps to have a team."