Save textures as either TARGA (.TGA) files in 24 bit depth or PNG files in 8 bit depth in order to preserve transparency and image channels. Make sure to set the file format to 8 bits per channel prior to saving if using PNG. Unreal Engine also supports full Photoshop (PSD) files, however due to size impact it is not recommended to use this in your final project.
RGB Channels Only
*Note: TGA supports a variety of compression formats or uncompressed. PNG is a lossless compression. TGA will always save a maximum of 8 bits/channel. So a TGA file with 24 bits/pixel has 24 bits total across the RGB channels, whereas a TGA file with 32 bits/pixel has 32 bits total (8 each) across each RGB+A channel.
Ultimately, the compression of the source file generally matters very little as long as it is lossless because all textures will be compressed into DXT/BC formats for GPU usage.
Advice
Avoid over reliance on techniques involving the Smudge and Liquify tools as they become easily observed after some time.
Work as non-destructively as possible by using adjustment layers rather than running processes.
Hotkeys To Know