Why is it recommended to top up CPF in January every 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.

CPF interest is calculated monthly, so financially there isn't a case for favouring one or the other (this assumes you are putting the funds to work outside of CPF earning the same return, so as per other post - need to be confident can have same rate of return)​​​