I did paint her that picture. But I think it comes down to pride. Until 2007, she was living a fairy tale. Her husband was making over $200K a year, they were living in a huge house nestled in an exclusive suburb of the Northeastern corridor. They never worried about things like living on a budget. But the divorce changed everything. As it turned out, they had few assets to split and her ex stopped paying alimony soon after the divorce (he lost his job and can't pay). So she had to move back to the deep south, settle for a smaller house though it is still very large for a single person... She feels like she already had to cut expenses "to the bone" (I don't think she really knows what it means). In other words, she feels like she has suffered enough humiliation already and selling the house to live in a "sordid" condo would be the straw that breaks the camel's back.
I think that "reality" hit her in the face a few days ago. With the prospect of her starting to take large distributions from her retirement accounts to pay for living expenses, she realized that the money would be gone in short order. So, she came up with the "plan", which she generously shared with us. Basically, the "plan" was for her to stay in her house and continue living like she does now (she claims she can't cut expenses any more than she has already done which is total BS unless having a cleaning lady has somehow become a necessity nowadays). When her retirement money runs out, then DW and I would have to provide for the shortfall (about $1,500 a month). I noted that her plan did not call for her to get a job and that we were not in a position to give anyone $18K+ per year for, possibly, the next 30 years. She told us that if we couldn't afford it, we should get second jobs... Unbelievable, but true.
After I finally stopped hyperventilating, DW and I told her there was no way this was gonna happen. Ever. She got mad, she pouted, she threatened, she begged, to no avail. We told her to make the best of her resources and not count on us. So right there, she got her big dose of reality. I welcome to the real world. So, to me, the annuities and reverse mortgage are big insurance policies for her as well as for our own financial well-being.