I had not heard the term "asset allocation drift" before. Turns out, according to Investopedia, that is another phrase for the condition where one needs to re-balance to the desired allocation. "Location Drift," means your percentage of assets in each type of account, also needs re-balancing.
Over time, if you set an allocation and a location (taxable, tax-deferred, tax-free) and don't do anything, the balances will drift. Most people set a band (a range +/- a set percentage) and when an investment type exceeds the band, they re-balance by either selling or adding $ to the investment. As for asset location, there are specific rules about which type goes where: bonds in tax-deferred or tax-free, equities in taxable or tax-free, etc.
So, the recommendation is 30% bonds/70% equities with 20% of equities in International. The software you are using is supposed to provide guidance for optimal tax advantage (the location part). Taking equities which can provide profits or losses and putting them into tax-deferred accounts (i.e., 401K, Traditional IRA), immediately eliminates any tax-savings because (1) any losses don't count, (2) all gains and dividends are taxed at regular rates, and (3) in the case of International you lose the ability to claim any pass-through taxation. So this software is recommending a tax-inefficient asset location.
If however, you are several years away from using the money, and your current tax-deferred is a Traditional IRA, consider partial conversions to a Roth. Specifically, equities excluding International should go into the Roth, same for bonds: all earnings, profits come out tax free. Alas, losses are losses and you get no credit for them.
International should stay in taxable: to take advantage of dividends taxation, and claim the international taxes as an offset to the Income Taxes that are due.
See Rick Ferri, All About Asset Allocation.
- Rita