Longevity risk question

[The Song of the]

From fin quiz:
Which of the following is *least likely* a method of avoiding longevity risk?
a. Buying a lifetime payout annunity
b. Increasing risk tolerance of the retirement portfolio
c. Diversifying investments across various asset classes

answer: the correct option is C
I answered B. Thoughts?

 

[ink]

I find a lot of fin quiz questions and item sets to have plenty of ambiguous answers, and that their explanations are just a rephrasing of an answer choice, so they are not very helpful. I’m not certain why asnwer C is correct, but through elmination process, you can figure out why A and B are wrong.
A. Incorrect, because these investments are specifically designed to account for longevity risk, so they are a method to avoid longevity risk
B. Incorrect, longevity risk implies outliving your financial assets, which implies that you haven’t had a high enough return to cover your needs. If you want to increase the value of financial assets, you will have to assume higher risk. So, increaing risk tolerance is one way of alleviating longevity risk, but at the expense of increaing your overall risk..
C. Correct (here is my guess why, though not sure it would be the best answer) . Because diversification has risk reduction benefits, but does not necessarily lead to having higher returns.

 

[broadex]

Agree that the wording may be ambiguous but i still think C is a clear answer. Considering longetivity risk being the risk of outliving your portfolio. The main mitigations are insurance annuity and higher asset base. Certainly A and B help in addressing the two. Diversification doesnt make your returns or asset base high though its a good thing to do.

 

[The Song of the]

Thanks gents.
My (incorrect) view was:
A - Obviously not the right answer as these are designed to avoid longevity risk.
B - Taking on more risk (perhaps too much) increases the likelihood of not hitting your return targets. For example, we don’t suggest taking on more risk in under-funded pensions to make up the difference. Obviously, a greater return is possible, but it seemed like the best answer when contrasted with C.
C - Cet par diversification is a good thing and makes a market participant more likely to avoid longevity risk than having concentrated positions.