Please take a look at these link. It discussed similar case with you, a i5-7600K with liquid cooling.
http://www.tomshardware.com/answers/id-3361015/7600k-kaby-lake-safe-temperature.html
well, Its a pity you decided to go with i5 and water cooling. I would have advice against it, since you better off buying i7-7700 non K with its free ugly standard heatsink, which in long term will perform better.
i5 shining era is coming to an end. More new AAA games are able to utilized more than 4 thread. i5 4 thread might still able to handle them, but the end is coming.
Well, what you can do now is make the most of it. My office 4 year old i5-2320 3,5GHz are still able to play any games I throw at it (battlefield 1, mass effect andromeda, The divisions, witcher 3, just cause 3, just cause primal, GTA 5, Dragon age inquisition), but without any background app.
Your result is a bit high (85C). You should check the water coolant, see if there was a chucked water line or bad thermal paste on cpu. Its a hussle using water coolant, which gave me headache when watching the installation and regular maintenance on it (not considering expensive). In my opinion, heatsink should not cost more than $25 as more than that you better off buying better cpu like i7-7700 or amd ryzen 1700.
My i5-2320 was using $15 deepcool iceedge 300 which was handed down from my older amd phenom 2 (so the heatsink has served me 6 years+) and all I need to change is thermal paste every 2 year and dust clean it while at it. I gave my amd phenom 2 a newer $10 deepcool ice edge mini F5 which perform a bit less as it was now use only for normal office.
Do be very careful with it as leakage might end your build instantly. Good luck