Reliability-based life cycle costing analysis (LCCA) supports optimized decisions on capital and operational expenditures for engineering asset management. In addition, it allows investigation of the impact of maintenance decisions on designing the service life of assets. The application of reliability-based LCCA in railway practice is challenging, as there is limited research with regard to integrating maintenance strategies, reliability and costs especially for embedded rail systems. Therefore, in this research, an LCCA model for these embedded rail system assets has been developed, which shows the optimum between the actual reliability profile, financial parameters and maintenance policies for specific variable conditions. This model incorporates both the uncertainties associated with degradation and maintenance strategies which have been integrated into a discounted age replacement model. This model facilitates a better understanding about the interaction among life cycle cost, rail degradation and maintenance strategies for a set of variable conditions. The output supports decision making on rail replacement and/or maintenance engineering. The model is demonstrated in a case study and validated with available (real) failure data from Dutch railroad service contractors. The potential of the applicability to ballasted tracks is also demonstrated.