Why is it recommended to top up CPF in January every year?

You earn interest in the following month after you top up, so if you top up in 31 dec, you earn interest for the full year.

Interest is earned on CPF top ups the earlier it gets into your account. If you top up by 31 Dec, interest starts earning from the following year Jan. Likewise, if you top up in 1 Jan, interest starts earning from Feb. The key difference would probably be the income tax relief, topping up in Dec19 will be considered as tax relief based on the income assessed for 2019 (if eligible) while topping up in Jan20 will will be considered as tax relief based on the income assessed for 2020 (if eligible).

In fact, any time is the best time to top up yr Cpf as the interest start to compound the day u top up irregardless it's Dec or Jan. Some ppl do it in Dec to catch the tax relief for next year too...

Due to the compounding effect. Your money starts earning interest starting from January itself, all the way till December.

If you just top up in December, it will only earn 1 month worth of interest.