Financial security comes at a high price, at least according to most Americans. A recent Schwab survey of workers who are investing in 401(k) plans reveals that, on average, these investors believe they need to save $1.9 million for their retirement. This hefty sum is a big increase compared with last year's survey, when 401(k) participants on the whole believed $1.7 million would buy them financial security in their later years. 

This raises two big questions: Are these workers right, and how much would you actually need to invest to hit this target? 

Jar labeled retirement savings with coins stacked up next to it.

Image source: Getty Images.

Will $1.9 million provide sufficient retirement security?

Although $1.9 million may seem like a huge amount, it won't necessarily produce as much retirement income as you think. 

If you follow the 4% rule, it would give you about $76,000 annually. That's a lot, especially since you'll get Social Security benefits, too. But you have to take inflation into account. If you're planning to retire next week, or next year, a $1.9 million nest egg will give you $76,000 of buying power, or close to it. Chances are good that's all you'd need -- or perhaps even more than you'd require for a comfortable life. 

But if you're not retiring for 30 years, rising prices mean your money won't go nearly that far. In fact, for those retiring in three decades, the inflation-adjusted value of a $1.9 million nest egg would be $760,908. That'll provide buying power at around $30,436 annually in today's dollars. When combined with Social Security, that might be plenty. But you may prefer a higher income, depending on your earnings and your expectations for retirement spending. 

How much do you need to save to get to $1.9 million?

If you decide $1.9 million is a good target, how much would you need to save to get you there? It depends on your age when you start investing as well as the returns you earn. Assuming an 8% average annual return, this is how much you'd need to set aside per year to reach your target by 65:

  • If you start investing at 25, you'd need to invest $7,350 per year.
  • If you start at 35, you'd need $16,750 per year. 
  • If you start at 45, you'd need $41,600 per year.

Obviously, these are big numbers, which puts this $1.9 million goal out of reach for many people who delay investing until their 40s or beyond.

But if you're serious about saving such a large nest egg, you start when you're young or in middle age, and you work hard to max out tax-advantaged retirement accounts, it's a target you very likely could hit. 

Should you aim for $1.9 million?

Your decisions about retirement are personal, and made with your goals and financial situation in mind. For many people, saving $1.9 million is a good target. But if you're still a long way from retirement, you have a high income now, and you want a more lavish lifestyle into your later years, you may very well need more.

The key is to determine your savings goal and start working toward it ASAP. Making an individualized plan and sticking to it gives you the very best chance of retiring with enough to enjoy your later years.