It's ok to cover everything up with dirt if that's the look you're going for. It should not affect drainage too much. We did it only temporarily until...
If you have a slope that is need of a retaining wall and have access to railroad ties, this is the perfect project for you! We'll be showing you how we made a railroad tie retaining wall in between two of our shops. We had 18 inches of a hill that needed to be retained. This is how we made a basic retaining wall using railroad ties found on our farm.
First, we leveled the area where to wall was going to be. Actually, it is slightly sloping down away from the building. We then tamped the dirt to make a nice, hard foundation. Tamping the dirt will also help to minimize settling and shifting of the wall. Although, it will settle and shift a bit no matter what you do.
Step 2: Cut the area to make a snug fit for the railroad ties
You want to cut the area where the wall will be square so the ties fit in there nicely. Make the area about 5 or 6 inches deeper than the railroad ties so you have room to fill the area behind the tie wall with gravel. This will allow any water coming down the hill to seep into the gravel instead of bulging out your tie wall and eventually making it fall down or move.
Step 3: Add in a layer of gravel
Once you've got a good area for your wall made, put down a foundational layer of gravel. We did ours about 4 inches thick and tamped it down real good. This will provide bottom drainage for the wall, allowing the water to drain away through the gravel instead of pushing the railroad ties out or eroding the dirt away from the wall.