At least some diversification is generally a good idea no matter your age or life stage. Here are a few thoughts and questions:
How are your 401(k) assets invested right now?
What are your other assets and resources? Don't analyze your 401(k) in a vacuum...instead consider how the diversification of your 401(k) fits with your bigger picture and diversification of your total assets/resources.
Even if you retired today instead of 5 years from now, you're still going to need your assets to provide a decent return and hopefully keep-up with or outpace inflation. A pendulum swing entirely to a fixed rate vehicle is not going to do that, especially in the current low rate environment.
While you might plan to retire in 5 years, presumably you're not going to withdraw your entire retirement account at year 5. Rather, you'd draw that over your retired lifetime, right? So 5 years is not really the investment target...that's just the starting point with some of the funds presumably being drawn out much later (10, 15, 20 years).
Age and time horizon for needing the money are important. However, I'm in the minority of advisers who believe that investment valuations trump those considerations. In other words, if asset prices are very overvalued (as they are today) vs. realistic, sustainable valuations under more normal economic conditions, then it really doesn't matter if you have 5 years or 35 years to retirement...why would anyone want to be overly exposed to the risk of their overpriced assets going into a steep decline? (And maybe this is what's actually behind your question...not wanting to experience a big drop in your 401(k) with only 5 years until you start retirement.)
You're in the perfect situation to engage in some broad-based retirement planning that coordinates all your resources, what you want to do in retirement, spending needs, inclusion of spouse or significant other (if applicable), how long you need the money to last (life expectancy), and so on. I'd encourage you to find a good fee-only financial planner who specializes in retirement income and distribution matters. Feel free to reach out if you have questions. SecondHalfPlanning.com
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